Basics of Crypto Exchanges Licensing

Published:
February 16, 2022
cryptocurrency concept with bitcoin

Despite the fact, cryptocurrencies have shown a decline in recent times, the number of people interested in crypto assets activities is steadily increasing. A crypto exchange, depending on its organizational structure, allows you to exchange different cryptocurrencies, or exchange crypto assets for standard payment means. Talking about basics of crypto exchanges licensing, should note tht the creation of such an exchange is one of the most popular and profitable areas of commercial activity. In order to ensure the legal functioning of this structure and obtain status of officially approved cryptoassets project, it is imperative to obtain an appropriate license.

The trend towards an increase in the number of crypto exchanges is also increasing. Below we will consider the basics of licensing operational way of such structures, and the main requirements put forward for successful realization of this procedure.

Types of Permits for Cryptocurrency Exchanges

Conventionally, cryptoexchangers can be classified as follows.

  • Classical type. Through such exchanges, users have opportunity to exchange cryptoassets between its different forms.
  • Fiat-cryptocurrency exchanges.

Accordingly, licenses are also divided into two types. In addition to these two types, two more groups can be distinguished separately:

  • Traditional permission, which gives the right to implement financial transactions and carry out certain transactions with crypto assets.
  • Specialized – it is issued by an authorized regulator. This permit controls previous type.

Optimal jurisdictions for establishing a crypto exchange

Among most popular jurisdictions, often chosen for the registration of exchange of crypto assets, following can be distinguished:

  • USA;
  • Singapore;
  • Hong Kong;
  • Estonia;
  • Japan is also one of the most “expensive” jurisdictions;
  • Great Britain.

Malta can be added to the same list, which is quite actively working on the creation of legal acts to regulate cryptocurrencies. In particular, a number of leading cryptoexchanges, such as Binance, have already thought about moving their structure within this jurisdiction.

If we describe the general process of forming the activity of a cryptocurrency exchange, it will look like:

  • company registration. It is worth mentioning that, often, organizations that implement common functions are ranked among top exchanges. This move is necessary in order to optimize taxation and diversify risks;
  • opening an account(s) to meet financial needs of the business;
  • hiring employees, in particular, the involvement of an AML specialist who assumes responsibility for compliance with anti-money trafficking policies, and a compliance officer – a specialist who will ensure that the company properly complies with all other requirements put forward at the legislative level ;
  • preparation of software and technical tools;
  • collection of documents required to activate operational processes.

Basics of Crypto Exchanges Licensing: General AML Policy

The first thing worth noting is the mandatory familiarization of an entrepreneur who wants to open a cryptoexchange with AML legal base in force in territory of chosen jurisdiction. Cryptocurrency exchange structure, performing its professional activities, should consider following:

  • regular training and advanced training of personnel;
  • implementation of a comprehensive risk analysis – due diligence procedure;
  • proper bookkeeping;
  • development and adoption of internal certificates in order to minimize the risks of illegal circulation of funds;
  • control over the fact that the authorized bodies were informed in a timely manner regarding the conduct of suspicious transactions.

The best solution would be to purchase a ready-made cryptocurrency license with comprehensive specialized aid.

Demanded Jurisdictions

Croatia

According to statement of National Bank of Croatia, cryptoassets are not classified as financial ones. However, very cryptocurrency circulation in country is not prohibited at legislative level. Compliance with KYC and AML requirements is mandatory.

Estonia

Estonia a few years ago aimed to digitalize the economy and establish a favorable environment for formation and future developing of Fintech startups. The main innovation of regulatory frame was evolving of a special license that allows you to exchange cryptocurrency among themselves, and for fiat. What is needed?

  • Having local office, hiring an AML staff member and director.
  • The starting capital of the company must be at least 12 thousand euros.
  • Availability of a bank account and the ability to provide a business plan, a non-conviction document and the Articles of Association.

Hong Kong

Today, the authorities of Hong Kong are quite neutral about cryptoexchanges. The regulator puts forward very specific requirements for such structures and related licenses.

  • To pass licensing it is mandatory to have all the constituent documents of company, and documents that would confirm the identity of each person.
  • In addition, it is required to hire a resident AML employee, rent an office and implement a well-formed AML policy, as well as create a business plan.

Japan

Japan has significantly changed the legal framework governing the field of payment services in general. In particular, the procedure for exchanging cryptoactives for conventional funds was regulated – need to get a license was fixed at the official level.

  • The director must be resident in the jurisdiction.
  • Mandatory presence of a business plan, documents confirming the identity of beneficiaries and directors, and well-written AML policy.

USA

With permit that allows cryptocurrencies exchange in United States, an entrepreneur may legally provide such type of service. Licensing of a crypto exchange is a rather long and difficult process.

  • Availability of an AML resident employee.
  • Ensuring full compliance with AML/KYC.
  • Ability to provide an extract regarding the registration of the company, as well as personal data of the contact person.

Great Britain

Today, the United Kingdom is a powerful space for functioning of cryptoexchanges; nevertheless, this is possible if the company has the appropriate license. The UK has created not only a reliable financial environment, but also a safe environment for making crypto operations.

  • It is obligatory to have commercial plan and an appropriate package of documents for creating of a company, in particular, confirmation of the source of funds received by the company.
  • We need a resident director with excellent professional reputation, experience and qualifications.

Crypto industry is popular and promising commercial area, in particular, activities related to crypto exchangers. If you want implementing your own idea and start developing in this direction, then we recommend that you pay attention to ready-made businesses for sale with licenses. Consider the following options:

On the ELI Deal platform, you can find even more interesting and profitable offers for the sale of companies and licenses. Contact our experts for advice and support.

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