In 2021 it became clear that the cryptocurrency industry will not be able to avoid regulation. To some extent, the supervisory authorities of almost all leading countries have paid attention to the developing market.
The legal status of cryptocurrencies varies significantly in different jurisdictions. While certain states are waging fierce wars with cryptocurrencies and tightening their regulation, there are countries with the opposite approach that support the development of blockchain projects. So in some countries, operations with cryptocurrencies are officially allowed. They are usually treated as a commodity or an investment asset, and for tax purposes are subject to the relevant legislation.
Below we will consider the most favorable countries for registering and running a crypto business.
Lithuania has a fairly friendly and fully regulated legal environment for the creation of fintech businesses, companies offering cryptocurrency exchange services, and crypto-wallets.
The Central Bank provides comprehensive support in the development of financial technologies and non-banking services for making payments. In addition, Lithuania is known for its support of crypto startups and contributes to their development in every possible way. In this regard, the procedure for obtaining cryptocurrency licenses has been simplified.
If we talk about the basic requirements for the licensee, the following should be noted:
- development of AML policies and rules and their application in the course of activity;
- KYC of each client must be carried out without fail, including obtaining data on the origin of the client funds;
- having its web resource;
- the company must obtain permission from the financial intelligence unit.
The license for the exchange of cryptocurrencies in Lithuania implies that all operations carried out by the company and the relevant documentation are conducted under the instructions of regulatory authorities.
In June of this year, the first country in the world to adopt Bitcoin as a state currency appeared – El Salvador. Now clients from different countries can conduct their business, purchase goods and services, invest in bitcoins, as well as legally trade and profit from cryptocurrencies. In this regard, a cryptocurrency license in El Salvador is an excellent choice for an investor.
There are many advantages that El Salvador offers for registering a cryptocurrency firm:
- A rapidly developing economy.
- Small taxes.
- Financial democracy. The transition to digital currency has made access to electronic transactions to be democratic.
- There is an opportunity for direct cooperation with foreign investors. Among the possible investments that a company registered in El Salvador can attract are contributions from the creators of well-known payment platforms and Bitcoin miners.
The jurisdiction of El Salvador allows foreign investors to conduct business freely, legally make a profit in cryptocurrency, and spend it.
In the past years, Estonia has repeatedly been recognized as one of the best countries for doing business in the field of blockchain and cryptocurrencies.
If licensed, a company in Estonia can provide the following list of services:
- electronic wallets;
- cryptocurrency exchanges;
- cryptocurrency payment system;
- crypto ATM.
However, it should be noted that since February 1, 2022, an updated Law on the Prevention of Money Laundering and Terrorist Financing is planned to come into force in Estonia, which in turn establishes stricter licensing requirements. So, according to the bill:
- The definition of “virtual currency service” will be expanded.
- Authorized capital, licensing, and operating fees are increasing.
- To obtain a financial license, an applicant will need to provide a broader list of documents and additional information.
- Stricter requirements will be imposed on the members of the management board, in particular, on their experience and limited participation in other companies.
- The list of grounds for a refusal to issue a license and cancellation of a license will be expanded.
- Providers will have to collect data about the remitter and the receiver of funds and share them with all parties to the transaction when the exchange or transfer of cryptocurrencies is completed.
In the UK, a fairly popular procedure is to obtain a license for cryptocurrency by everyone who wants to provide services related to crypto assets in the country.
To enter the local market, crypto exchanges and crypto wallet service providers should obtain a license for cryptocurrency in the UK from the Financial Supervision Authority (FCA), which controls the work of companies in the cryptosphere.
The regulatory body keeps under control all parties involved in the acquisition and sale of cryptocurrencies using the “Know Your Customer” (KYC) procedure. In addition, Due Diligence (CDD) procedures are used to identify risks and provide measures to eliminate identified risks. These measures are aimed at countering money laundering and the financing of illegal manipulations in the cryptocurrency business. A cryptocurrency license in the UK makes it possible to provide various functions of the company properly.
According to the latest change in Canadian legislation, local and foreign crypto platforms and companies using crypto assets in their activities are classified as money service businesses (MSB), which must fulfil all obligations, including the implementation of a full compliance program and registration with the Financial Transaction Analysis and Reporting Center of Canada (FINTRAC).
When setting up a company in Canada, it is necessary to register with FINTRAC to conduct operations with cryptocurrencies in the case of the following types of activities:
- Cryptocurrency mining, allows investors to receive common cryptocurrencies and then trade them.
- Trading activity – Cryptocurrencies can be traded as commodities following Canadian laws.
- Payment services activities – Investors can set up a business offering cryptocurrency payment services in Canada.
- Crypto ATMs – the installation of ATMs that exchange money for cryptocurrency is also allowed in Canada.
- Cryptocurrency exchange platforms can be set up under Canadian law.
As well as any activity in the field of financial services, including those provided to residents of Canada from abroad, obliges the business entity to register with FINTRAC (obtain a license), regardless of the province.
Obtaining crypto licenses in offshore jurisdictions is also gaining popularity. The UAE, Labuan, the Cayman Islands, the Philippines, Mauritius, and Vanuatu have made significant steps in this direction. In 2022, many other countries are expected to officially join the crypto community. The adoption of legislation regulating activities related to cryptocurrencies allows states to control the circulation of cryptocurrencies as much as possible, to counter money laundering and terrorist financing, as well as to create a safe environment for investing funds.
By obtaining a licensed status, crypto exchanges and other service providers gain more trust from users. It is also positive that, if there are official rules of the game, classic regulated investment and payment institutions will be able to join the crypto community, which previously could not do this because of regulatory barriers.
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