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Obtaining a cryptocurrency license
Cryptocurrencies have become an integral part of our lives and the world of global finance.
Exchanging cryptocurrencies among themselves and for fiat currencies, transfers and payments, storing and managing clients' cryptocurrencies, mining, issuing your tokens, NFT - all these activities have not only become common businesses but are already regulated and require appropriate licenses in many countries around the world.
Why to get a cryptocurrency license?
Although the cryptocurrency industry is still relatively young, not all countries have yet adopted legislation regulating this industry, and some businesses prefer to conduct their operations in the shadow sector, an increasing number of market participants, and especially consumers, are coming to the understanding that being integrated into the legal field, the ability to use legal protection when making transactions and not being afraid of violating their rights and losing assets is worth "playing by the rules."
Businesses want to demonstrate to their clients and counter-parties their reliability and compliance of their services with quality and safety criteria - after all, this allows them to stand out from their competitors, develop new areas and attract the most promising consumers. No one wants to associate themselves with the amount of deception and chaos that the cryptocurrency market represented about 10 years ago.
What cryptocurrency licenses exist?
Licenses in the field of cryptocurrencies, can be divided into two types:
Specialized crypto-licenses, which are developed and put into effect by competent government authorities to regulate certain types of cryptocurrency transactions (for example, licenses in El Salvador or based on the MiCA act in the EU), often these are the so-called VASP licenses, from Virtual Asset Service Provider;
Traditional licenses that regulate the implementation of certain financial transactions with fiat money or other assets, and which indirectly include cryptocurrency transactions (for example, MTL licenses in the USA or Money Service Business in Canada, which, although not intended as cryptocurrency licenses, are today an integral part of the process of registering activities in these countries);
Separately, it should be said that even in countries where any cryptocurrency activity is not licensed, the company may be required to confirm the legality of its activities.
Such confirmation can be a Legal Opinion - a document issued by a licensed lawyer containing an answer to the question of compliance or non-compliance with the applicable law of certain company operations. Such a document, although not a license, serves as a guarantee of legality for counter-parties and helps to solve, among other things, marketing tasks.
For what activities can you get a crypto license?
An important classification of licenses is the division by types of activities carried out on the crypto market:
VASP licenses usually allow cryptocurrency exchange transactions, cryptocurrency transfers and custodial services (opening cryptocurrency wallets and storing third-party funds on them);
ICO and the issue of new cryptocurrencies involve the registration of the issue of a security or electronic money;
Registration and activities of cryptocurrency funds, brokers, crypto exchanges, banks, as well as DAO (Decentralized Autonomous Organizations in which the company's shares are represented in the form of cryptocurrency, and corporate governance is carried out through a smart contract in the blockchain) and other specialized institutions;
Operations with NFTs (Non-Fungible Tokens), mining and staking (receiving profit in the form of a percent of the placed cryptocurrency for providing transaction validation services) are often also regulated separately and require additional permits.
Requirements for obtaining a crypto license
Terms, cost and other conditions for obtaining a cryptocurrency license depend on both the type of license and the types of activities that are planned to be carried out, and on the country in whose jurisdiction it is planned to conduct business. Crypto-licenses are issued on a territorial basis - there are no licenses and regulations that allow doing business "all over the world". There are certain common points and trends, for example, those based on the norms of international conventions or other supranational bodies - such as the EU law MiCA (Markets in Crypto Assets), which all legislation of EU member states must comply with.
- AML/KYC compliance
Combating money laundering is a critical requirement for any business in the financial sector, including cryptocurrency businesses. The development of appropriate policies, identification and verification of counter-parties, and hiring qualified MLRO officers - without all this, the process of obtaining a license is unthinkable. - Substance
To combat shell companies, shells and one-day companies, most countries require confirmation that the license applicant actually exists and is physically located in the country of operation, has a staff of specialists, the appropriate technical capacity and has sufficient funds to conduct the business it declares. - Fit&Proper
Of course, any regulator issuing licenses will want to make sure that the future participant in the regulated market, as well as its key personnel, management and founders, have sufficient experience, education and reputation, have not been noticed in dishonesty, have not fallen under sanctions, criminal cases and bankruptcies.
Naturally, this list of requirements is not complete, very approximate and indicative.
What is the process of obtaining a crypto-license?
In general, the process of obtaining a crypto-license is close to any other licensing of activities, so the key point that allows you to avoid mistakes, and as a result - unforeseen expenses and refusals to issue the coveted document, is strict adherence to the formal procedure.
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Legal planningThe preparatory stage of obtaining a license is determining which country and type of license the business will need to conduct the desired activity, assessing the risks and consequences, as well as other related parameters - tax burden, cash flows and financial plan.
After all, there is no single correct way to legalize your activity that would suit all businesses - everyone has different goals, objectives, budgets and priorities. Therefore, copying other people's business structures without a thorough understanding of why and for what purpose this or that choice was made is a sure way to get a completely different result than expected! -
IncorporationRegistering a company that meets the requirements of the law is the first and essential step in obtaining a license. Remember, the company will not be able to advertise, attract clients and conduct business before receiving a license - this will be a violation and a sure way to be denied a license.
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Preparation and collection of a package of documentsThe next step is for the company to comply with all requirements, develop internal documentation, find and hire the required employees and collect a set of documents for applying the regulatory authority.
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Application review and obtaining a licenseThe next stage is the regulator reviewing the received application, clarifying the points of interest, checking the applicant's compliance with all applicable requirements and making a decision on issuing a license.
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Compliance with current requirementsRemember that the compliance process does not end with obtaining a license, but only begins!
Timely reporting, periodic audits of activities, maintaining the company's compliance with requirements, paying taxes, and ongoing interaction with regulatory authorities - all these are key tasks in the process of conducting regulated cryptocurrency activities.
Types of cryptolicenses
To legalize cryptocurrency transactions, the most convenient option is to obtain a VASP license, which allows to manage operations with virtual assets, including custodial services, cryptocurrency exchange, and client-to-client transactions.
Properly developed internal documentation, in particular AML/CFT policies to combat money laundering, plays a key role in obtaining this kind of license.
A list of countries where we can assist to obtain this license
Crypto fund is a necessary structure for legal collection of funds from crypto investors, for organization of hedge fund, for investments of new format, for attraction of business angels, for creation of venture capital fund with capital in cryptocurrency.
