There are 2 questions that are often posed to us by Crypto Exchange Entrepreneurs:
- Do I need to apply for a License for my proposed Offshore Crypto Currency Exchange?
- Should I go down the road of applying for a Special License for my proposed Offshore Cryptocurrency Exchange?
The answer to the first question is it depends on where you want to incorporate!
Certain “Offshore” (ie nil/low tax and or low regulation) jurisdictions (most notably Malta and Estonia) have passed laws making a Cryptocurrency Exchange a Licensable Activity.
Obviously if you want to incorporate your Operating Company in, or place your headquarters in, one of these countries you will have to apply for a Special License or else you run the risk of being prosecuted by the local Industry Regulator (which could, if you’re convicted, result in a large fine or potentially jail time or both).
If you’re not willing or able to go down the Licensing road (and or if tax minimisation/ownership privacy is important to you) you might want to incorporate your Company in a Low Regulation Privacy Haven ie somewhere where buying and selling Cryptocurrency is not a prohibited (or licenseable) activity and which does NOT have a public register of directors, shareholders or owners. Most people in that position choose to incorporate in either:
- Belize – For detailed information click on this link: http://offshoreincorporate.com/belize-offshore-companies/ ;or
- Seychelles – For detailed information click on this link: http://offshoreincorporate.com/seychelles-offshore-companies ;or
- Nevis – For detailed information click on this link: http://offshoreincorporate.com/st-kitts-and-nevis-offshore-companies/ ;or
- Hong Kong – – For detailed information click on this link: https://offshoreincorporate.com/hong-kong-companies/
You may be interested to know that arguably the world’s biggest Crypto Exchange ie Bitmex is incorporated in Seychelles.
Pros and Cons
Probably, like most OCI clients (we set up at least 1 new Crypto Exchange Offshore every week) you are wondering should I set up/apply for a License (eg Estonia, Malta etc) or should I take the easier road and just incorporate somewhere where such an activity is not regulated nor prohibited by law?
The question of where to incorporate your Exchange is a commercial decision for you and you alone to decide.
That said the main difference between places like Seychelles/Belize/Nevis etc and Malta/Estonia etc is that such a business in Seychelles etc is not a licenseable activity nor a prohibited activity. As such it will be a lot quicker, a lot easier and a LOT cheaper to set up there (You could potentially be incorporated and doing business within 24 hours of engaging a Company Formation Provider and for as little as $US900).
In places like Malta, Estonia etc such a business is a Licenseable activity. As such if you want to incorporate such a business in Malta/Estonia etc you MUST apply for a license. To do this will take anywhere between 6 weeks and 6 months and cost anywhere from $13,000 to as much as $US30,000.
Whether to go down the licensing road or not, again, is a commercial decision for you and alone to decide.
The advantages of having a license are business certainty, you will probably attract a better quality of customer and you will have a wider choice of banking partners.
The downside is the time it takes to establish, the cost to establish and red tape ongoing (eg if you incorporate in an unregulated jurisdiction you won’t need to collect DD/KYC etc re each customer making a lot easier to onboard new customers).
Would you like to know more? Then please Contact Us: