crypto license labuan

Crypto License in Labuan

Labuan is one of the most favorable jurisdictions for entrepreneurial activities in the world in terms of taxation, including cryptocurrency companies. The team of experts at Gofaizen & Sherle is ready to assist in the process of registering a cryptocurrency company and obtaining a license for cryptocurrency operations in Labuan.

Labuan is a federal territory in Malaysia that has become a popular destination for cryptocurrency companies. Thanks to its low taxation and favorable regulatory environment for businesses, Labuan provides an opportunity for cryptocurrency companies to provide their services in the country where they are registered. One of the key advantages for many digital asset entrepreneurs is low operating costs and full compliance with the legal system.

In 2018, the Labuan Financial Services Authority (LFSA) incorporated exchanges into its jurisdiction by granting them licensed offerings. An exchange is defined as a trading platform that gives digital asset owners the ability to post their offerings to investors and trade in a variety of ways: crypto to crypto, fiat to crypto, or vice versa.

In April 2019, Fusang Exchange, Asia’s first fully licensed securities exchange specializing in digital assets, received approval from the LFSA.

Over the past few years, Labuan authorities have stepped up efforts to regulate trading and exchange, so the cryptocurrency exchange has been licensed and officially recognized to attract customers and ensure sustainable business. In doing so, Labuan allows for international markets with a corporate tax rate of 3%, while the standard corporate tax rate in Malaysia is 24%.

The International Financial Center (IBFC) provides business structures for digital financial services (DFS) in Labuan. These include digital banking, business insurance, and digital intermediaries such as robo-advisors, digital asset exchanges, cryptocurrency trading platforms, blockchain tokens, and electronic payment systems.

Find more information about the crypto license in Labuan

Advantages of obtaining a cryptocurrency license in Labuan

Obtaining a cryptocurrency license in Labuan has many advantages:

  • Labuan regulates cryptocurrency companies to ensure that their operations are legal and transparent. The country has clear rules and guidelines to help comply with relevant regulatory requirements and ensure transparency during transactions.
  • Attractive tax regime. Cryptocurrency companies can benefit from a low-income tax rate of 3% of net income, which creates a favorable business environment. In addition, cryptocurrency entrepreneurs have access to more than 70 Malaysian tax treaty partners.
  • Labuan allows cryptocurrency exchanges to interact with international markets. Companies can establish a presence in Labuan and offer their services to customers worldwide, expanding their audience and potential customer base.
  • In Labuan, companies do not need a local partner in Malaysia and there are no exchange controls in place. In addition, marketers are granted a 2-year multi-entry work visa (renewable) to stay in Malaysia.
  • The platform of digital asset exchange allows electronic money and cryptocurrency transfers, providing the convenience of exchanging various currencies.

Requirements for Obtaining a Crypto License in Labuan

The following qualified entities may obtain a license for a cryptocurrency exchange in Labuan:

  • Individuals or organizations with a good reputation and sufficient experience in the cryptocurrency exchange industry with long-term experience in the industry.
  • Regulated cryptocurrency exchanges or similar service providers from other jurisdictions that have obtained approval from local authorities in Labuan in the form of a letter of consent.
  • Any licensed institutions, including approved cryptocurrency exchanges under the Financial Services Act 2013, with the approval of the Central Bank of Malaysia.

Regulatory and regulatory requirements to obtain a cryptocurrency license in Labuan include:

  • Minimum paid-up capital of $130,000, which has not been reduced by losses. A certificate from banks in Malaysia and Labuan is required.
  • Local office in Labuan. All transactions must be conducted in, through, and out of the local office to meet minimum expense requirements.
  • Licensees are permitted to conduct transactions in foreign currencies of their choice, including the Malaysian Ringgit (MYR). Transactions with residents of Malaysia are permitted, including authorized dealers approved by the Malaysian Monetary Authority.
  • Secure system and reporting. The company must have a built-in security system that provides an interface for the technology client. Any intrusions or system failures, including adverse incidents, must be reported to the Labuan Financial Services Authority (FSA) with the root cause and an impact analysis report must be submitted within 14 days.
  • Audit and Reporting. The company must appoint an approved external auditor to conduct an annual audit of business transactions. Each transaction must be recorded and all findings reported within 3 business days.
  • AML/CFT Compliance. The licensee must strictly comply with the Anti-Money Laundering and Counter-Terrorist Financing Act and the Guidelines published by the Central Bank of Malaysia and Labuan Authorities. This must be enforced through the appointment of a compliance officer.
  • In case of changes in shareholders, directors, office location, or the establishment of additional offices outside Labuan, as well as in the case of outsourcing, prior approval from the Labuan Financial Services Authority (FSA) is required.

Other regulatory requirements include:

1. Company structure:

  • the company must have at least 1 shareholder, which can be a natural person or a legal entity (nationality or residency of the shareholder is not limited);
  • the company must have at least two directors, who must be natural persons (the nationality or residence of the directors is not limited);
  • the company must appoint a secretary who is a resident of Labuan, whose task is to monitor compliance with the law and the company’s obligations;
  • a certain number of local employees are required in the company to have an active presence in Labuan and to comply with local employment requirements.

2. Companies incorporated in Labuan must adhere to the following rules regarding the name:

  • the company name must consist of letters of the Latin alphabet;
  • the company name must end with one of the following suffixes or their abbreviations: Limited, Corporation, Incorporated, Societe Anonyme, Sociedad Anonima;
  • if a company uses the Malaysian word “Berhad”, it must be preceded by the letter “L” to indicate the company’s registration in Labuan.

3. Restrictions on a company name include:

  • the company name may not contain words or phrases that require approval or license, such as “Bank,” “Building Society,” “Investment Fund,” “University,” etc;
  • the company name must not contain direct links to the name of state, national, or local governments;
  • the name must not imply illegal activities or imply royal or state patronage;
  • the registrar has the right to reject any company name which he deems undesirable or contrary to the public interest;
  • the name may not be wholly or substantially similar to an existing company name;
  • if a foreign language is used for the company name, a translation must be provided to the registrar to ensure compliance with the above restrictions.

Crypto license lawyers in Labuan

Maksim Gasanbekov


Associate Partner, Head of Sales (Crypto and Blockchain)
Fedor Cid


Senior Associate, Consultant

Request more information about the Labuan Crypto License

The process and timeline for obtaining a crypto license in Labuan

The procedure for obtaining a license to exchange cryptocurrencies in Labuan includes the following steps:

  1. Preparation of documents:
    • a business plan for three years, including projected revenues and expenses;
    • documents confirming the company’s experience in exchanging cryptocurrencies and its reputation;
    • financial reports and certificates from banks confirming the opening of a corporate bank account and the availability of the necessary capital;
    • documents confirming the presence of a local operating office in Labuan;
    • information on the company’s senior management and shareholders;
    • anti-money laundering policies and procedures.
  2. Submission of the application to the Labuan Financial Services Authority.
  3. Preliminary verification of the application and documents submitted.
  4. Once the Labuan FSA has completed its preliminary review, it may request interviews with the company’s directors, chief executive officer, and controllers. Once satisfied, the Labuan FSA issues approval in principle and provides a list of requirements that must be met within a certain time frame. Some of these requirements may include posting disclaimers on websites, transferring paid-up capital to a corporate bank account, or providing additional KYC documents.
  5. After completing all the above requirements, Labuan FSA will issue a full license to perform cryptocurrency exchange in Labuan. However, the license may contain specific conditions and requirements that the company must comply with.

Obtaining a license takes approximately 4 to 6 months.

It is important to note that the procedure for obtaining a license may vary depending on the specific requirements and policies of the regulatory agency. It is recommended to contact Gofaizen & Sherle legal advisors who specialize in cryptocurrency licenses for detailed information about the procedure and requirements.

Overview of Crypto Regulation in Labuan

Project time frames 3 to 6 months
State fee for application 1 500 USD
Required share capital 110 000 USD
Corporate income tax 3%
Annual supervision fee 1 500 USD
Local staff member AML Officer and Director
Physical office Required
Accounting audit Required
Sustainability Sustainable
Bank account options Some European EMIs, Midshore EMIs

Accounting and auditing for crypto companies in Labuan

There are several key points and requirements to consider when doing accounting and auditing for cryptocurrency companies in Labuan:

  • Accounting Standards. Cryptocurrency companies in Labuan are generally required to prepare their financial statements by recognized accounting standards. Labuan Financial Services recommends following International Financial Reporting Standards (IFRS) or other generally accepted accounting principles.
  • Audit requirements. Cryptocurrency companies must have their financial statements audited by an independent auditor. The auditor must be approved by the LFSA and have the necessary qualifications and experience.
  • Reporting Obligations. Companies associated with the cryptocurrency business are required to submit audited financial statements to the LFSA each year. These financial statements must include a balance sheet, income statement, statement of cash flows, and notes to the financial statements.
  • Classification of Crypto Assets. It is important to properly classify crypto-assets for accounting purposes. The LFSA guides the classification of cryptocurrencies, including the distinction between investment portfolios and operating assets.
  • Internal controls. Cryptocurrency companies must establish robust internal controls to ensure the accuracy and reliability of their financial statements. This includes implementing procedures to protect crypto assets, prevent scams and maintain correct records.
  • Compliance and anti-money laundering. Cryptocurrency companies in Labuan are required to implement robust anti-money laundering policies and procedures, conduct customer due diligence, and report any suspicious transactions to the appropriate authorities.

Given the complexity of accounting and auditing for cryptocurrency companies, it is recommended that professional accountants and auditors who are familiar with Labuan’s regulatory requirements and have experience in the crypto industry be engaged.

Crypto regulation in Labuan

In Labuan, cryptocurrencies represent 21% of assets, the third most important in the Malaysian community, after real estate (44%) and gold (33%). A functioning cryptocurrency exchange is licensed and in legal status. The Labuan Financial Services Authority (LFSA) is the body responsible for regulating the financial industry and oversees cryptocurrency companies in Labuan. As such, cryptocurrency companies in Labuan are subject to the same laws and guidelines followed by other financial institutions operating in the region.

The main laws to which cryptocurrency exchanges are subject are:

Before engaging in DFS activities, organizations in Labuan are required to obtain prior approval from the LFSA. In addition, given the virtual and non-personal nature of DFS, the regulator pays special attention to anti-money laundering and counterterrorist financing (AML/CFT) compliance and market conduct. This is critical to ensure that DFS activities are not used to conceal illegal money laundering or terrorist financing schemes and to promote professionalism and transparency in customer relations services.

Taxation of cryptocurrency companies in Labuan

The taxation of cryptocurrency companies in Labuan is subject to the current tax laws and regulations in Malaysia. Labuan, as a jurisdiction, offers certain tax advantages to attract international business entities, including cryptocurrency companies.

Labuan’s tax laws include:

A few key points regarding the taxation of cryptocurrency companies in Labuan:

  • Labuan Business Activity Tax. Under LBATA, Labuan companies engaged in qualifying activities, including cryptocurrency transactions, can elect to be taxed at a flat rate equal to 3% of audited net income or a fixed amount of 20,000 Malaysian ringgit (about $4,000), whichever is greater. This tax regime applies to Labuan companies that meet certain requirements, such as carrying out core activities exclusively with non-residents and not participating in the Malaysian domestic market.
  • There is no tax on interest, management fees, royalty fees, or technical support fees in Labuan. In addition, there is no stamp duty, goods and services tax, import duty/sales/services tax, capital gains tax, and inheritance tax. Additionally, there is a 50% tax credit for hiring foreign professionals/managers, a 100% tax exemption on director’s compensation for foreign directors, and no dividend tax for shareholders.
  • Bilateral double taxation treaties. Malaysia has an extensive network of bilateral double-taxation treaties with many countries. These agreements aim to eliminate double taxation and provide tax benefits for Labuan companies engaged in international business activities, including cryptocurrency transactions. Cryptocurrency companies in Labuan can receive reduced or exempt taxes on certain transactions with countries that have Bilateral Agreements with Malaysia.

It is important to note that tax regulations and policies can change over time, and cryptocurrency companies in Labuan need to stay up-to-date on the latest tax laws and consult with tax professionals.

FAQ on obtaining a crypto license in Labuan

How much does a crypto license in Labuan cost?

Labuan has several types of licenses that may apply to cryptocurrency activities, such as a money broker license, a credit token license, or a digital asset and exchange (DAX) license. The specific license required for cryptocurrency activities will depend on the nature of the business.

The cost of obtaining a cryptocurrency license in Labuan usually includes various fees, which include:

  • the license application fee, which can range from 1,000 to 5,000 Malaysian Ringgit ($200 to $1,000), depending on the type of license;
  • annual license fee, which may vary depending on the type of license and the scope of business activities.

What are the other license fees in Labuan?

Labuan has license fees that are payable by companies to obtain and maintain different types of licenses:

  • the license fee to register and maintain a Labuan Limited Liability Company is approximately 1,000 Malaysian Ringgit per year (about US$200);
  • license fees for obtaining and maintaining a license to manage assets in Labuan – depend on the size of the assets to be managed by the company;
  • license fees for obtaining and maintaining a license to process and administer funds – also depends on the size of the assets to be serviced by the company;
  • license fees for obtaining and maintaining a license to process and administer cryptocurrencies in Labuan depend on the specific requirements and activities of the company.

We recommend contacting our advisors for information on licensing fees in this area.

What is the minimum capital required to start a cryptocurrency business in Labuan?

The amount of capital needed can vary depending on factors such as the scope of services provided, technical infrastructure, staffing requirements, compliance costs, and potential plans to expand the business.

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