The popularity of cryptocurrencies such as Bitcoin and Ethereum has prompted countries to evaluate how to regulate the growing crypto industry. A significant aspect of this evaluation will be the crypto license. If you are planning to set up a crypto exchange, a wallet service, or a blockchain related business, you may be legally required to obtain a crypto license.
A crypto license is a sanctioned regulatory body license that allows a business to operate in the crypto industry. It protects consumers, ensures that companies comply with the law, and protects the financial industry from illegal activities, including fraud and money laundering.
What Is A Crypto License
A crypto license is a specialized version of a financial services license. It allows businesses to do the following:
– Purchase and sell cryptocurrencies
– Run a cryptocurrency exchange
– Operate a digital wallet
– Offer cryptocurrency payment services
– Provide custodial services.
A government agency issues these licenses as a means of monitoring the crypto space and ensuring that there is no opacity in the industry. Without a legitimate license, businesses can face fines, closure, or even lawsuits.
Why Businesses Should Obtain a Crypto License
There are many downsides to not obtaining a license to operate in cryptocurrency. Here are some of the reasons as to why they should obtain one:
Avoid Legal Issues
Getting a crypto license means that your business will operate legally in a given country. This helps to avoid loss of business due to fines or legal challenges.
Instills Confidence
Clients are likely to trust a platform that is licensed. This means that the company is concerned about their safety.
Enhanced Financial Management
A majority of the banks will not work with crypto companies that do not have a license. Therefore, having a license will simplify the bank account opening process.
International Reach
Having a license makes it easier to operate in different countries as many of them require a license to operate in their country.
License Types
Depending on the country and the services being offered, licenses will vary. Some of the licenses that are offered include:
License to Operate a Crypto Exchange
This is offered to businesses that want to create a platform where users can trade cryptocurrency. This is the most sought-out license.
Wallet Service License
This license is offered to companies that want to create a digital wallet that enables them to keep their cryptocurrencies.
Custodian License
With a custodian license, companies can keep and manage customers’ digital assets.
Payment Processing License
This license allows businesses to facilitate crypto payments and implement blockchain technology into their payment systems.
Countries That Offer Crypto Licenses
Some countries have attracted many businesses that want to obtain crypto licenses due to their lenient regulations.
Estonia
Estonia offers a simplified licensing procedure and a digital-forward ecosystem. Startups prefer Estonia due to its ease and transparency.
Malta
Malta, known as the “Blockchain Island,” has a detailed regulatory framework and licensing procedure for crypto businesses.
United Arab Emirates
The United Arab Emirates, particularly Dubai, has become a significant center for crypto activity with a well-defined regulatory framework.
Singapore
Singapore has a reputation for setting the bar with strict regulations, complimented by a supportive framework.
Steps to Obtaining a Crypto License
Obtaining a crypto license includes many steps. Despite the differences of each country, the steps include:
1. Choose Jurisdiction
Consider the country that best fits your business objectives, available budget, and regulatory framework.
2. Company Registration
Before you apply for a license, you need to register your business entity.
3. Collection of Documents
You need to prepare your business plan and a Compliance Policy. You also need your AML and KYC documents.
4. Meeting the Minimum Requirements
Countries require the business to show a certain amount of money to guarantee the business will stay operational.
5. Application Submission
Ensure your application is complete, and submit it to the right office.
6. Checking Compliance
It is the job of the regulatory body to look through, risk assess, and determine if the company is real or not.
7. Licensing and Starting Operation
Once the company is given the green light, the company is able to sell crypto legally.
Compliance Requirements
Once a business has received a license to operate, the business has to comply to the following:
– The business has to implement KYC and AML
– The business has to monitor transactions that are out of the ordinary
– The business has to report any suspicious financial activity
– The business has to comply to the state of cybersecurity
– The company has to take care of the sensitive information of the customers.
A business will be fined or lose their operating license if they do not comply with the above.
Obtaining a Crypto License
Despite all the advantages, getting a crypto license is not easy.
Cost
Getting a license, legal aid, and compliance all have to be paid for, and this is a burden for small businesses.
Continuous Changes in Regulations
Always-changing multi-country regulations mean countries have adaptive regulations, and in turn compliance requires constant monitoring and updates.
Ongoing Effort
Depending on regulatory jurisdiction, approvals can take months, and in turn, your compliance system for your business should be adaptable to ongoing updates.
Predictability of Crypto Regulatory Frameworks
Growing demand for crypto services naturally and predictably leads to regulation of compliance frameworks for licensing. Established regulations provide predictability for both crypto services and protecting customers.
More of the following can be expected in the future:
– Improved international coordination of licensing.
– Better predictability of protection regulations for customers.
– Better predictability of regulations to control and limit compliance.
– Better predictability of regulations for more comprehensive licensing.
More direct regulation of the crypto industry means crypto services will be less risky for big business.
Conclusion
A crypto license is the first step in establishing a sustainable crypto business and protecting users. Compliance is a crypto license and it provides a business with global opportunities.
The process of obtaining the right license may seem overly complicated. The positive outcome of protecting the consumer for long-term sustainability of the business is without doubt, an outcome that is positive.