Licensing the activity of cryptocurrency exchange in USA | Law&Trust International

Licensing the activity of cryptocurrency exchange in USA

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License for cryptocurrency exchange in the USA entitles its owners to operate with exchange of cryptocurrencies. Except crypto exchanges, all other applicants intending to provide payment services are interested to obtain such license.

Licensing of cryptocurrency exchange itself is sufficiently patient process. We will consider everything in details hereunder.

Which is the status of those who intend to provide services on cryptocurrency exchange?

Potential license applicants intending to operate the activity on cryptocurrency exchange will be recognized as companies providing money transferring services (Money Service Business, MSB).

License:

Which license is required for the MSB to operate in a lawful way?

  • If the company intends to operate as an intermediary in transactions concerning exchange of cryptocurrencies to real funds (cryptocurrency - fiat), it is required to obtain the Money Transmitter License.

    If the company decides to act as an intermediary in transactions on exchange of one cryptocurrency to another (cryptocurrency - cryptocurrency), it is required to obtain the MSB License and examine requirements set by legislation of each state.

Which requirements are necessary for the MSB to obtain the license for cryptocurrency exchange in the USA?

  • To obtain license for the cryptocurrency exchange, the potential exchangers must:

    1. Pass the registration procedure in the United States Department of the Treasury (the registration should be extended every two years);
    2. Provide the list of their agents;
    3. Notify about suspicious transactions;
    4. Comply with the Anti-money laundering (AML) and the countering of financing of terrorism (CFT) policy;
    5. Report on transactions exceeding the amount of 10 thousand USD;
    6. Maintain the information regarding money transfers;
    7. Comply with rules on transferring funds;
    8. Maintain records on currency exchange;
    9. Maintain other types of reports.

    Non-residents of the US operating the activity on cryptocurrency exchange in the US must also comply with these rules.

What are the particularities of obtaining license for cryptocurrency exchange in the USA?

  • Particularities of licensing of activity related to cryptocurrency in the US are in the federal structure of the United States. Except requirements of the national regulator, nearly each state sets its own requirements. The latter may differ from each other. Consequently, if the crypto exchange intends to provide services on cryptocurrency exchange in several states, its activity will be subject to licensing in each of these states.

    For instance, New York state requires to obtain special license called BitLicense to operate activities related to the cryptocurrency exchange.

    Nevertheless, yet not all states have finally decided regarding their position in relation to the exchange of cryptocurrencies. In addition, the position of regulators has a tendency to change from time to time.

What information is required by most state regulators?

  • Each state determines its requirements at the legislative level. To obtain  for the cryptocurrency exchange in the USA, at least it will be necessary to disclose the following:

    1. Name and registered office of the company;
    2. Name of the trademark used to provide services on cryptocurrency exchange;
    3. List of all offenses that had been committed by the applicant for a certain period of time;
    4. Presence of current litigation in relation to the applicant;
    5. List of all financial services that were provided by the applicant earlier (if they took place) and all services that the applicant intends to provide;
    6. List of locations where the applicant plans to provide the financial services;
    7. List of authorized persons who will provide the financial services;
    8. List of other states where the applicant intends to provide the financial services;
    9. Information regarding presence of active bankruptcy procedures in relation to the applicant;
    10. Sample form of agreements with clients.

What to make of it?

  • As we have observed, licensing of the cryptocurrency exchange in the USA is sufficiently complicated process. It requires careful analysis in each certain case. Position of the national regulator is as unpredictable as the exchange rate, and sometimes it has a tendency to change. The support of a professional consultant may substantially minimize the risks of applying sanctions on the part of US government authorities.

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