The crypto industry is rapidly evolving and attracts streams of investors and regulators.Most countries have authentic regulatory requirements for running businesses related to cryptocurrencies. Lawful activity requires compliance with unique rules for a particular country. You have to consider all tax and legal nuances.
Let’s examine the essential conditions for obtaining a crypto exchange license, and the cases when you need it.
In What Cases Might a Business Need a Crypto License?
First, knowing in what cases a license is required is helpful. This will allow you to comprehend that in 99% of cases, it is impossible to avoid getting it.
Cryptocurrency Exchanges
You need official permission if your startup aims to assemble a crypto exchange. It is prohibited to construct an online infrastructure of cryptocurrencies exchange without regulation. Financial controllers can be sure that you follow the law on combating money laundering (AML). Also, official business guarantees security and transparency for individuals.
Payment Systems
More and more companies offer customers new payment solutions using digital money. Such services must have a license to ensure the security of transactions.
Cryptocurrency Wallets
Compliance with digital asset management requirements is the key to the trust of potential customers. They have to consider you reliable since they are going to entrust you with their crypto savings. Any conscious investor chooses the more trustworthy option.
Tokenization
You cannot ignore financial policy when launching an initial coin offering (ICO). Tokenization of assets is impossible without investor trust. Their trust is impossible without the legitimization of your activities.
Lending and Arbitrage Trading
Both niches are associated with certain risks that oblige adherence to regulatory standards. You need a license when lending involving cryptocurrencies. The reason is dealing with customer accounts. When working with trading strategies, you must guarantee transparent and honest transactions.
Benefits of a Crypto License for Business
Acquiring official documents is an essential step for a business. Although it requires some financial and time investment, the result justifies the cost.
You Become Legal
A license means operating in a legal field. You can avoid fines, sanctions, and lawsuits without violating the jurisdiction.
Opportunity for International Activity
A license is a ticket to the industry’s global arena. Besides, licensing in one jurisdiction can ease obtaining official documents in another.
Protection from Fraudsters and Legal Risks
No business is immune from unfounded claims. Official businesses are protected by controllers just like their clients.
Increased Trust Rate
If your business is legitimate, its reputation will be significantly enhanced. Also, you will increase customer trust and open the doors to cooperation with large funds and corporations. Investors are interested in promising startups whose activities follow reporting and are transparent.
Access to Work with Banks
High-risk crypto activities cannot count on cooperation with banks if they are illegal. Registration in the UAE, or EU allows you to access trustworthy financial instruments.
What Do You Need to Obtain a License?
Each jurisdiction puts forward its requirements for those wishing to legitimize their firm. Let’s look at some probable conditions that are most common in diverse systems:
- KYC/AML compliance. Following KYC (Know Your Customer) and AML (Anti-Money Laundering) procedures usually include at least verifying clients and partners and the presence of a certified AML specialist. The regulator may also require a report and transaction monitoring.
- A business plan includes describing the company’s activities, risk assessment, and financial forecasts.
- Company incorporation documents. You must provide a founding agreement, an extract from the state register and the register of beneficiaries, and information about the supervisors.
- In some jurisdictions, companies have to provide a privacy policy and terms and conditions.
- Key management documents. They may have your passports, identification codes, and certificates of no criminal record. The regulator may also need data on shareholders and beneficiaries.
- Proof of origin of funds. You must prove the legality of your financial assets by providing bank statements.
- Some jurisdictions may require a resume of managers, and addresses of the company’s crypto wallets.
This is not a complete list of requirements. Also, it is regularly updated and varies from country to country. Obtaining a crypto license is a time-consuming and multi-stage process. This is why contacting fintech consultants is better for correct and quick legitimization.
Best Jurisdictions for Business Legitimization
Each system has pros and cons. Thus, it is important to weigh the pros and cons and investigate the information.
- Estonia. The pros are low cost, access to the European market, and total transparency. The cons are high requirements for AML/KYC policy.
- Dubai. The absence of taxation and active support for crypto companies make this an excellent choice for startups. The cons are that the cost is higher than in Europe and that registration is complex.
- Singapore. Progressive regulation is subject to official legislation and a strong financial system. The cons are the high price and strict regulation of legitimization processes.
- Czech Republic. Low price and a loyal attitude towards crypto and IT startups. The disadvantage is the lack of clear support from the country’s state.
- Liechtenstein. Advanced legislation (Blockchain Act) indicates support for the crypto industry. The cons are strict reporting and transparency provisions.
Besides, excellent licensing conditions exist in Poland, Canada, Malta, Japan, and New Zealand.
How to Get a Crypto License Effortlessly
If you are unsure that you can thoroughly prepare documents and deal with regulators, there is a way out. Delegating responsibilities to fintech consultants allows you to save time and mitigate the risks of refusal. One of the leading companies providing full legal support is Fintech Harbor Consulting LTD.
The company will help you choose the optimal jurisdiction. They are also good at performing correct reporting planning and preparing relevant documents. Experienced specialists are ready to help you settle all issues to legitimize your business. Remember that legal business is a promising business.
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