License for exchange of cryptocurrency | Law&Trust International

Licensing of Activity of cryptocurrency exchanges and cryptocurrency exchange houses

Notwithstanding protracted falling of cryptocurrencies in first six months of 2018,  number of crypto-enthusiastics continues to inncrease. Establishing the cryptocurrency exchanges, which, depending on structure of the exchange itself, allows exchanging different cryptocurrencies to each other, or trade cryptocurrencies to traditional assets, is one of the most beneficial directions of activity in crypto industry. To ensure legal functioning of such exchange, licensing of the crypto currency exchange is mandatory!

Only for the beginning of 2018, there were more than 8 new cryptocurrency exchanges. Taking into account such trend, our company decided to describe briefly general types of licenses on exchange operations related to cryptocurrencies, requirements to registration of such companies et cetera.

Types of Licenses to exchange cryptocurrencies

to exchange cryptocurrencies

Types:

  • Cryptocurrencies exchange houses may be conditionally divided into two categories:

    1. Clasical cryptocurrency exchanges, which allow to exhange crypto currencies exclusively one to another.
    2. Fiat cryptocurrency exchanges, which allow to exchange fiat (traditional) currencies to cryptocurrencies, and vice versa.

    Thus, licenses to exchange cryptocurrencies may be divided into the same two types.

    Additionally, licenses, which allow to perform such operations, may be classified into two groups:

    1. Specialized crypto-licenses implemented by authorized bodies especially to regulate operations regarding exchange of cryptocurrencies (as an example, in Japan and Estonia).
    2. Traditional licenses, which regulate executing financial operations, and operations with cryptocurrency, are indirectly subject to them (for instance, in USA, Hong Kong).

Jurisdictions to register cryptocurrency exchange

  • The most popular jurisdictions to obtain license regarding exchange of cryptocurrencies, as of the mid 2018, are the following:

    1. Japan (it is also the most “expensive” jurisdiction for establishing cryptocurrency exchanges. For a long period of time Japanese cryptocurrency exchanges were undisputable leaders in everyday traded values);
    2. Estonia.
    3. USA.
    4. Hong Kong.
    5. Singapure.
    6. United Kingdom.

    Relatively soon this list will be supplemented by Malta, which actively develops legislation that will be directed to regulate fin-tech activity in the state, Top exchanges (such as Binance) have already declared transferring their activity to this jurisdiction.

    In a short form, the process of licensing the cryptocurrency exchange includes the following:

    1. Company registration in chosen jurisdiction. It should be noted that, in general, structure of top exchanges includes several companies with shared functions. It shall be performed to optimize taxation and diversify the risks.
    2. Opening accounts for needs related to operating business;
    3. Hiring special employees, list of which varies depending on chosen state (generally, it is required to appoint the AML-officer [specialist responsible for realization of anti-money laundering policy], Compliance-officer [specialist responsible for correspondence with the scope of other mandatory requirements prescribed by law];
    4. Preparation of necessary technical equipment and software;
    5. Collecting and preparation of required documents for operating the activity.

Standard AML requirements to open the cryptocurrency exchange

  • It should be noted from the outset that it you want to open the cryptocurrency exchange, you should examine the AML legislation in detail of chosen jurisdiction. Generally, cryptocurrency exchange in its activity must:

    1. perform procedures of complex rysk analyse (due diligence);
    2. regularly train the personnel;
    3. draft inner certificates to minimize risks of money laundering;
    4. accounting;
    5. reporting activities regarding suspicious transactions and regular notifications to authorized bodies in relation to such transactions.

    For more details about certain conditions of obtaining cryptocurrency license in the scope of jurisdiction you may read our profile articles.

    Our cooperation will result obtaining crypto-license in short terms and for reasonable fee. You may buy our service package including legal support in obtaining license to exchange cryptocurrencies turning to us by the telephone or sending us an email.

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