The digital certificates, security tokens and blockchain industries are rapidly evolving, creating new opportunities for innovative businesses. EU legislation and regulatory landscape give a wide range of opportunities for blockchain startups. It can be difficult to navigate and select best option for your business-project, but with our help you can make the right decision and obtain a permit for cryptocurrency deals in the most favorable market-space for you.
Our lawyers are specialists who understand the laws and regulation basis of countries worldwide. We’ll give you the opportunity to get a license for a crypto-exchange in Singapore, Estonia, France, the USA and other.
Types of Cryptocurrency Licenses
A licensed document is permission from regulatory authorities to carry out a specific activity. To get a license, or as it is sometimes otherwise called, a permit or certificate, depending on the specific jurisdiction, you must fulfill a number of requirements and comply with conditions, for example, on the minimum security capital.
Licenses vary depending on the specific type:
- crypto-exchange;
- crypto wallet services;
- brokerage in the field of cryptocurrencies;
- crypto-currency issuance.
From the entire list, we can highlight work formats common to the entire financial market:
- financial consulting;
- trust asset management, etc.
Such types fall under traditional licenses for carrying out financial activities. But just like working with crypto-assets, all this requires a special permit in most countries. In some cases, we are talking about an e-license.
When getting a permit, it is important to globally separate two types:
- operation exclusively with cryptocurrencies;
- crypto and fiat money.
Our specialists give you expert assistance in choosing a license that would best suit the needs and commercial plans of your business-project. We’ll be happy to direct all our efforts to achieve the fastest and most efficient results for you.
Licensing Authorities and Regulatory Bodies
The Financial Stability Board is an international organization created by the countries of the G20 on the basis of the Financial Stability Forum. The main goal of the organization is to identify weaknesses in global financial stability, develop and apply regulatory and supervisory policies in this area. The Council includes regulators from major countries around the world, as well as a number of international organizations (European Commission, World Bank, Basel Committee on Banking Supervision, etc.). The Council regularly holds events to study the impact of cryptocurrencies on global financial stability. The issue and use of crypto affect many important aspects of human activity and society, including issues of data security, withdrawal of capital, as well as combating the legalization (laundering) of proceeds from crime and the financing of terrorism.
Approach of legalization of ICOs and token offerings is a major concern for ICO organizers in most countries. Modern legislation in the field of collective financing allows operators of licensed collective financing platforms to use modern ICO and token placement tools. In some jurisdictions, licensed crowdfunding platforms can legally distribute tokens as securities in cooperation throughout the European Union and the United States.
Regulators in most jurisdictions, including the US, UK and Singapore, often consider tokens to be securities and require them to be registered under the laws that govern the issuance of securities. European regulators follow the opinion of the European Central Bank, indicating that all instruments based on cryptocurrencies that have characteristics of securities must be issued according to the rules governing the process of public issue of securities. The organizers of the issue often have no intention of entering the securities market and want to issue utility tokens during the ICO process, or, conversely, issue security tokens during the STO process.
The License Application Process
The license is provided by the national regulator of the state where the business is registered. The basis is local legislation and international law. It is important to comply with following normative points.
- Registration as a virtual assets services provider. Different countries have their own requirements for permitting documentation, taking into account the chosen field of activity. It is necessary to comply with the conditions regarding the number of shareholders and residents from other countries, beneficiaries and directors, as well as the amount of starting capital.
- Submission to the regulator of a set of documents for registering an enterprise. It becomes important to draw up a charter and prepare constituent agreements. Confirmed subject to compliance with regulation basis and rules for handling digital financial resources. Licensing of crypto-transactions is provided to organizations that work according to internal control instructions and implement standards to combat the laundering of illegal funds. In addition to the usual documents, a description of the technical means used is drawn up.
- Opening bank accounts. Separate accounting of digital and real currencies is being formed.
- Experienced staff. You will have to hire specialized employees who have the necessary certification and experience. Reputation in the field of virtual assets and finance is important.
The obtaining process varies by jurisdiction, but the basic principle is similar globally.
Preparatory stage.
- Analysis of goals and objectives.
- Choice of jurisdiction.
- Registration of a legal entity in the selected jurisdiction (in some cases, for example, for large exchange offices or exchanges, several companies are required).
- Opening a bank account.
Once the company is opened, the process of acquiring a license begins. This requires compliance with specific jurisdiction requirements and in most cases requires next-mentioned.
- Technical equipment of the work.
- Registration of all necessary employees on staff – this is necessary to comply with all AML requirements (more on this later on the page).
- Placement of authorized capital, if required, in the required amount.
- Preparation of all necessary documents.
After the company is registered, all requirements of the regulator for issuance are met, an application is submitted, a check is carried out for compliance with all requirements and a permit for crypto activities is issued.
Financial Considerations and Risk Management
The greatest risks for cryptocurrencies are associated with the inability to trace funds and their owners in some cases. In addition, this area is most susceptible to fraud and the creation of illegal flows of funds. Other main risks also include the following:
- crypto price volatility;
- legal risks associated with the actions of regulators (for example, a ban on crypto in a certain country);
- hacker attacks, fraudsters;
- inability to cancel an erroneous transaction with crypto.
The obligation to comply with AML/CFT measures is a fundamental factor in the activities of every European crypto company and VASP. In addition to the development and implementation of effective internal rules and AML/CFT algorithms (theoretical component), the tools and channels through which the company in real life will fulfill its obligations to identify and verify clients and their transactions also play an extremely important role. (practical component).
Our company are experts in the field of establishing and licensing companies. We have been working in this industry for many years, demonstrating only high-quality and fast results. Our lawyers will become your reliable allies on the path to establishing your business.
Author of this article is Denys Chernyshov – CEO and founder of the world-famous law firm Eternity Law International.
