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.

Countries

Cryptocurrency License in Croatia

CountryCroatia
License Requirements

Compliance with KYC and AML requirements

Documents for obtaining a license
  • Extract from the register 
  • AML policy 
The timing1 week
Cost5,000 EUR and more

The National Bank of Croatia adheres to the following idea: the assets forming cryptocurrency cannot be considered financial, but the circulation of electronic money in the country cannot be considered illegal, cryptocurrency exchanges are not prohibited.

The absolute majority of Croatian financial experts consider it necessary to introduce regulatory procedures at the legislative level and even licensing of ICO activities.

Cryptocurrency license in Estonia

CountryEstonia
License Requirements
  • Local presence: real office, director and AML officer 
  • Authorized capital – 12,000 EUR 
  • Bank account in EU 
  • Impeccable reputation. Education and experience 
Documents for obtaining a license
  • Business plan 
  • AML policy 
  • Police clearance certificate 
  • Resume
  • Extract and charter 
The timing2 months and more
Cost4,900 EUR and more

In 2017 Estonian government set course for digitalization of economy and started creating favourable climate for the development of fin-tech companies and start-ups. One of the outcomes of this policy was adoption of the amended version of Anti-Money Laundering Act, where the terms “virtual currencies” (cryptocurrencies fall under this category) and “electronic cash-box” were introduced. The main legislative innovation was the establishment of a special permission (a license) which allows to perform cryptocurrency exchange, including exchange for traditional or fiat money.

Obtaining license for cryptocurrency exchange in Hong Kong

CountryHong Kong
License Requirements
  • Local AML officer 
  • Local company 
  • No requirements for the authorized capital
Documents for obtaining a license
  • Constitutional documents of the company; 
  • Identity documents for each participant in the company; 
  • Company reports; 
  • Office lease contract, layout and photo of premises;  
  • AML/CFT policy; 
  • Business plan of the company
The timing2-5 months
Cost15,000-35,000 EUR

It should be pointed out from the outset that at this moment state authorities have significantly neutral position in relation to obtaining license for exchange of cryptocurrency in Hong Kong. It means that the issue of cryptocurrency exchange licensing is in suspension. However, such position of the regulator may be transferred from amorphous to very specific form.

Licensing the activity of Cryptocurrency Exchange in Japan

CountryJapan
License Requirements
  • Authorized capital amounting to about 90,000 USD
  • Local company
  • Director – resident of Japan
Documents for obtaining a license
  • Business plan 
  • Documents for Directors and Beneficiaries 
  • AML policy 
The timing6 months
Cost30,000 EUR and more

Japanese legislation on payment services was significantly modified. Since April 2017 amendments to the financial legislation of the country entered into force. Issue concerning exchange of cryptocurrency to traditional settlement funds was regulated for the first time ever. Persons intending to provide such services are obliged to obtain the license for exchange of cryptocurrencies.

Cryptocurrency License in Madeira

CountryMadeira
License Requirements

No, no license is required for local companies. MSB status is needed.

Documents for obtaining a license

No

The timing1 month
Cost6,900 USD and more

The United States of America are the most attractive state for doing business. However, given significant differences in legal regulation depending on the state, a lot of projects experience significant difficulties when operating in the United States.

A small town called Madeira, or Madeira Beach, geographically is a part of the Florida state. The local municipality has not clear regulatory position for: Bitcoin circulation is allowed and the need for licensing is not defined. 

Cryptocurrency License in New Zealand

CountryNew Zealand
License Requirements
  • Office and company in New Zealand 
  • Impeccable reputation and necessary experience of the director 
  • No criminal record of all senior executives  
Documents for obtaining a license
  • Business plan 
  • Extract from the register 
  • Personal Details forms for the director and beneficiary   
  • Police clearance certificate
The timing1 month
Cost15,000 USD and more

The New Zealand digital platform is significantly developed due to the clear investment climate and the precise legal regulation expressed in licensing activities. Thus, the New Zealand Financial Markets Authority (FMA) relates transactions with cloud assets to securities, which puts them under regulatory control of two legislative acts:

  • On Financial Markets,
  • On Financial Service Providers.

Any variations of cryptocurrency are equal to the types of securities, so a license for cryptocurrency in New Zealand is not required. In this case, it is necessary  formally to license the activity in accordance with which the the cryptocurrency market counterparties provide services to customers.

Licensing the activity on Cryptocurrency exchange in Singapore

CountrySingapore
License Requirements
  • Authorized capital amounting to about 166,00 euros 
  • Minimum 2 directors of the resident of Singapore 
  • Directors’ experience – minimum 2 years
Documents for obtaining a license
  • Business plan 
  • AML policies
  • Bank account details
The timing6 months
CostMPI – 30,000 EUR and more

At the present moment Singapore is one the jurisdictions that establised regulation of cryptocurrency exchanges. During 2014-2018 the national regulator (MAS) issued interpretations expressing its position in relation to the cryptocurrencies, operating the ICO, as well as licensing the cryptocurrency exchange in Singapore, but at 2019 a new Payment Service Act came in force that introduced 2 types of licence: small payment institution and major payment institution. Nowadays, those who operate the exchange of cryptocurrencies shall obtain license in Singapore. Furthermore, if the company deals with cryptocurrencies that may be classified as securities, such entities shall entail license of stock exchange.

Licensing the activity of cryptocurrency exchange in USA

CountryUSA
License Requirements
  • Local AML officer
  • Compliance with AML\KYC requirements
Documents for obtaining a license
  • AML\KYC policy
  • Company extract
  • Contact person’s details
The timing2 weeks
Cost6,900 USD

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.

Cryptocurrency license in United Kingdom

CountryUnited Kingdom
License Requirements
  • Local director with impeccable reputation and experience 
  • Compliance with strict requirements for AML
Documents for obtaining a license
  • Business plan
  • Policy of the website (privacy policy, terms and conditions)
  • Confirmation of the origin of the funds 
  • Resume
  • Addresses of the wallets 
The timing3 months and more
Cost15,000 EUR and more

The United Kingdom of Great Britain and Northern Ireland currently represents a powerful platform for the operation of cryptoexchange exchanges and cloud mining products subject to licensing of cryptocurrency operations. However, there are a lot of legal uncertainties, which create difficulties in assigning cryptocurrency to one of the existing objects of civil rights.

Formally, the actions of cryptocurrency exchanges in the UK have not been subject to state licensing, and a license for cryptocurrency in the UK is not required. However, several years ago, the Financial Regulation and Control Department created the Innovation Hub platform, in which crypto-players and interested persons were given the opportunity of legal support of a recommendatory nature. Participants do not need to register, and as a result of this a vague situation emerged, in which the UK cryptocurrency license temporarily took the backseat.

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