Does your Business Need a Cryptocurrency License?

Forward-thinking business owners are increasingly recognizing the potential of cryptocurrency and are eager to incorporate digital currencies alongside traditional fiat money into their operations. However, to do so legally, they must secure a specific license from the jurisdiction where their company is registered. It’s important to note that currently, only a few countries offer such permits, and in some places, working with cryptocurrency is strictly prohibited. In this article, we’ll delve into what a crypto license entails, which types of businesses require one, the process of obtaining it, and the countries where you can get this crucial authorization.

What is a Crypto License?

A crypto license is an official permit issued by a designated governmental authority that regulates operations involving cryptocurrencies. With this license, companies are authorized to legally issue their own tokens, establish cryptocurrency exchanges, create digital wallets, and engage in various other activities related to digital currencies. This license is a key to unlocking the full potential of digital currencies in your business operations.

Why is a Crypto License Important?

A crypto license is crucial for business owners for several reasons:

• Legal legitimacy and attracting investors. Companies operating with cryptocurrency gain legal legitimacy and certainty, which helps attract investors and customers, enhancing the potential for future growth.
• Compliance with AML and KYC regulations. Holding a crypto license ensures that the company adheres to anti-money laundering (AML) and know your customer (KYC) regulations, which are essential for preventing fraud and maintaining regulatory compliance.
• A crypto license is not just a legal requirement; it’s a badge of respectability and trust. It enhances a business’s credibility in the eyes of partners and the public. Given the cautiousness many people still have about cryptocurrency, they are more likely to trust companies with a proven reputation. A state-issued license provides potential customers with confidence that they are dealing with a legitimate and trustworthy entity, significantly reducing fears of fraud.

Which Business Needs to Get a Cryptocurrency License in 2024?

Individuals who buy and sell cryptocurrency for personal use do not need a license. However, if someone decides to start a business involving the exchange, purchase, or sale of cryptocurrencies, they will need to obtain a crypto license. Here are some situations where a crypto license might be required:

• A company will need a crypto license if its owners plan to incorporate digital currency operations into their business activities. Without this license, the business could face penalties for violating the laws of the country in which it is registered. Additionally, suppose a company operates in a country that does not require a crypto license. In that case, it may encounter several difficulties, such as being unable to conduct transactions with firms in countries where a crypto license is mandatory or facing challenges opening accounts in foreign banks. Therefore, it’s essential first to identify which countries are suitable for cryptocurrency-related activities. We recommend looking into Comoros, Thailand, Malta, and Portugal. To navigate this issue, it’s advisable to study the different procedures for obtaining a crypto license in these jurisdictions.
• Obtaining such a permit will allow the company to legally exchange cryptocurrency for fiat money and vice versa, as well as transfer various tokens between digital wallets. The company will be able to sell its products or provide services in exchange for cryptocurrency, issue its own coins, or act as an intermediary in exchange transactions. For instance, a business can establish its own online exchange office.
• Companies that pay their employees in cryptocurrency or offer services for managing third-party digital assets also require a license.
• Permission is necessary for companies that plan to issue coins for a startup with the intention of further listing.

Types of Сryptolicenses

There are a variety of cryptocurrency licenses available, each designed for specific tasks and with unique requirements for applicants. Here are the most prevalent ones:

• Crypto Wallet License. This license allows a company to develop its own application for users to store and manage digital assets. Holders of a crypto wallet license must comply with AML and KYC regulations and ensure the secure storage of tokens. This involves using various authentication methods and verifying user identities.
• Exchange License. With this license, an entrepreneur can establish a cryptocurrency exchange. Applicants must create a secure platform that supports user identification, multiple authentication methods, and compliance with AML/KYC rules.
• Mining License. This license permits a company to mine cryptocurrencies or offer services for token extraction. Given the need for high-performance equipment, applicants must demonstrate that their operations meet technical safety and environmental standards.
• Trade License. This license enables a company to launch a crypto exchange that offers various trading options, including options, futures, margin, and spot trading. To obtain this license, the applicant must maintain a certain level of capital on the platform and implement a risk management mechanism. Compliance with AML/KYC regulations is also mandatory for crypto exchanges.
• ICO/STO License. This license allows a company to issue coins through an Initial Coin Offering (ICO) or security tokens through a Security Token Offering (STO), which provides holders with rights or shares in the company. Applicants must prepare a detailed technical description of their project and adhere to the relevant securities laws.

How to Get a Cryptocurrency License

While obtaining a cryptocurrency license may seem like a complex and time-consuming process, it’s within your reach. It requires compliance with various technical, legal, and financial conditions. The specific requirements for candidates can differ by country, but with the proper guidance, the licensing process can be a manageable and rewarding journey.

• Research the jurisdiction. Study the jurisdiction where you plan to register your company and obtain a crypto license. This involves understanding the licensing process, regulatory framework, tax conditions, and business environment of the chosen country.
• Register the company. If it doesn’t already exist, set up the company that will apply for the license. Before beginning this process, it’s essential to have a well-prepared business plan, a clear legal structure, and the necessary start-up capital (which varies by country and type of license).
• Prepare the license application. Compile a detailed business plan and supporting documents that demonstrate the company meets the technical specifications and compliance policies required. You may also need to provide identification documents for top executives, founders, and other senior managers.
• Apply to the regulatory authority. Apply to the appropriate state body. During the review process, the regulator may request additional information or clarifications about the company. Be prepared to provide extra documentation or answers to avoid delays.
• Facilitate the approval process. Meet all the required conditions, such as maintaining the minimum capital requirement, submitting necessary financial statements (mainly if the company is already operating and plans to expand into cryptocurrency), and undergoing audits. It’s crucial to continue meeting these requirements after obtaining the license, as failure to do so could result in revocation.

The time frame for obtaining a cryptocurrency license can vary significantly, ranging from 15 working days to six months, depending on the country and the complexity of the application process.

Countries that License Crypto Businesses

There are only a few countries that offer licenses for companies involved in cryptocurrency activities. Here’s a look at some jurisdictions that not only provide crypto licenses but also actively support the growth of the cryptocurrency industry.

Canada

In Canada, companies operating in the cryptocurrency space are required to comply with federal tax regulations. The Financial Transactions and Reports Analysis Centre of Canada (FinTRAC) oversees the activities of crypto companies. To conduct business legally, cryptocurrency exchanges must apply for a financial services license and register with FinTRAC. This regulatory framework ensures that companies adhere to strict anti-money laundering and counter-terrorist financing regulations, thereby fostering a secure and compliant environment for cryptocurrency operations.

Comoros

Comoros is a beautiful destination for international cryptocurrency projects due to its liberal regulatory environment. The country is known for its openness towards digital currencies, making it an ideal jurisdiction for companies seeking to engage legally in the cryptocurrency market. The registration process for companies in Comoros is straightforward, and the country’s regulatory stance promotes the smooth development of crypto businesses. Additionally, Comoros’ diplomatic relationships with various countries and international regulators provide a supportive framework for companies looking to establish a global presence in the cryptocurrency industry.

Malta

Companies wishing to engage in cryptocurrency business in Malta must obtain a license from the Malta Financial Services Authority (MFSA). The primary requirement for obtaining this license is that the company must demonstrate its expertise and technical capabilities in the crypto sector. Additionally, the company must establish a physical office in Malta with at least three employees. Malta has specific national legislation governing cryptocurrency, which company owners need to understand and comply with thoroughly. This regulatory framework is designed to ensure a secure and compliant environment for cryptocurrency activities.

Thailand

In Thailand, cryptocurrency licenses are issued by the Securities and Exchange Commission (SEC), which also oversees crypto transactions. To secure a license, companies must meet several requirements, such as registering the company, enrolling with the tax authority, and adhering to security and risk management standards. Besides the primary documentation, the company’s head and founders must provide identification documents and information on their financial status to the registration authority. This comprehensive regulatory process helps maintain the integrity and security of the cryptocurrency industry in Thailand.

Portugal

In 2024, Portugal was recognized as one of the most favorable European countries for conducting cryptocurrency business. This is due to the simplified procedures for company registration and license acquisition, as well as the absence of double taxation on cryptocurrency transactions. This environment is particularly conducive to the growth and development of cryptocurrency startups. Additionally, company owners registered in Portugal have the advantage of being able to apply for a residence permit, further enhancing the appeal of the country for crypto entrepreneurs.

Conclusion

Acquiring a crypto license is a crucial step for any company entering the cryptocurrency sector. Despite potential challenges, obtaining this license ensures the business operates legally, not just domestically, but also gains credibility with investors, partners, customers, and regulatory bodies worldwide.

With a crypto license, a company gains the legal authority to engage in various cryptocurrency transactions, including transfers, receipts, issuance, exchanges, and other transactions. However, it’s essential to recognize that different types of crypto licenses come with specific requirements. Understanding these nuances is critical to avoid fines, license revocation, or market bans imposed by regulatory authorities and international regulators.