License for cryptocurrency exchange

Most entrepreneurs who have entered the international market have appreciated the potential of non-fiat money as a reliable financial instrument. To use the advanced technologies in the Fintech world in the legal field, it is important to obtain a special license for cryptocurrency in the chosen jurisdiction.

This authorization will allow you to:

• carry out banking transactions using crypto coins on a par with traditional (fiat) monetary units;
• receive payments from customers for the purchase of goods or services in cryptocurrency;
• place tokens for sale, issue their own non-fiat money or act as an intermediary in such transactions.

Legal regulation of business activities using crypto-coins has been developed only in a number of countries around the world. Typically, jurisdictions classify the exchange of non-fiat funds as an investment and financial activity. Accordingly, it is necessary to request authorization to conduct transactions with cryptocurrencies from the local financial regulator in a particular state.

Depending on the scope of the operations carried out, several crypto licenses can be distinguished for:

• exchange of cryptocurrencies (coins for fiat money, and vice versa);
• storage of non-fiat money (virtual wallets);
• intermediary services in the exchange;
• creation of a crypto bank or crypto fund.

Choosing a jurisdiction for obtaining a license

To carry out business activities related to the use of cryptocurrencies, it is important to choose a state for company registration that offers transparent conditions for trading and exchange of these funds. In such countries, operations with crypto coins are regulated at the level of legislation.

For example, in the United States, the rules of exchange and trade in non-fiat funds have been established since 2013. In this state, the largest number of bitcoin ATMs in the world has been created. Profits from the growth of the cryptocurrency rate are subject to capital gains tax, and operations on the sale and purchase of coins are subject to the securities law. Even with the above conditions, the United States remains one of the most promising jurisdictions for companies of this profile.

The following states also offer to issue a license for cryptocurrency exchange:

• Estonia.
  This country introduces advanced Fintech technologies into everyday life by providing the opportunity to pay and earn in cryptocurrency. Legal entities registered in Estonia are granted licenses for exchange services and opening cryptocurrency wallets. The country supports startups in the field of crypto technology and peer-to-peer services.
• Belize.
  In this state, the procedure of company registration is maximally simplified, and foreign investors can open a company here in 24 hours. Licenses to carry out financial activities through the exchange of cryptocurrencies in Belize are issued on flexible and transparent terms, which undoubtedly increases the attractiveness of the jurisdiction for entrepreneurs in this area.
• Switzerland.
  In this state, there is no existing legislation that would regulate the activities of cryptocurrencies. However, FINMA licenses are provided for legal entities working with blockchain in the field of financial intermediary and banking services.

Canada, Luxembourg, the Netherlands, South Korea and Denmark also provide for a special license for trading, exchanging and storing cryptocurrency capital for companies registered in these jurisdictions.

Stages of obtaining a license

Each jurisdiction has separate requirements for candidates for a cryptocurrency license. In particular, the conditions relate to:

• Document package.
  May require business plans, proof of professional competence, risk assessment related to crypto activities.
• Company representatives.
  You will need to collect the background and contact details of the founders, current owners and managers of the firm. Proof of criminal record and no links to terrorism is also required.
• Company`s capital.
  The state may set a minimum threshold of authorized capital, and also require proof of the legality of obtaining these funds.
• Bank account.
  Most states will require a standard corporate account, while some allow the use of cryptocurrency wallets or a brokerage account.

Depending on the conditions of the jurisdiction, a separate licensing procedure is applied, minimum application processing times and fees for issuing a company permit are set. The general sequence of obtaining a license consists of the following steps:

1. Preparation of a business plan.
2. Registration of the company in the chosen jurisdiction.
3. Completion of the package of documents for obtaining a license.
4. Submitting a request to the local financial regulatory authorities.
5. Obtaining a license to exchange/trade/store cryptocurrency.

Altindustry’s practicing lawyers will help to organize the licensing procedure in accordance with the laws of the chosen legal field. Specialists will choose the best way to implement the business plan, low-tax jurisdiction and take care of obtaining the appropriate permit for cryptocurrency operations.