Where To Incorporate an Unlicensed Cryptocurrency Exchange

Recently, (given it’s such a rapidly evolving area), we decided to take stock of the current licensing regimes across the Offshore World the goal being to see what jurisdictions would currently allow a Cryptocurrency Exchange to incorporate there without the added requirement of having to apply for some form of Special License.

Our In-House Lawyer was given the job of writing to his Lawyer counterparts in each of the respective/potential jurisdictions. The question posed was as follows:

“I/we have a new client wanting to launch a new Cryptocurrency Exchange. Is such a business a licensesable activity or a prohibited activity in your jurisdiction currently? If it is a Licenseable activity what license will need to apply for what will it cost roughly (eg not less than $X not more than $Y) and how long will it take to obtain a license.”

Here are the answers received from each of the said Lawyers/Law firms, verbatim:

Panama: “The Crypto does not have any regulation in Panama. As a matter of fact we have incorporated companies for this type of business before. As long as the name does not have the word Bank it will be OK. The difference is that we need to do a more in-depth due diligence and do require more documents and info, being this is a high risk business. The first question that comes to mind is whether they want to use the Panama company to launch the protocol and transfer control over to a company in a different country to operate the exchange?”

Belize: “Good day to you. Kindly note that last year the IFSC issued a public statement confirming that, as is the case in many jurisdictions, the IFSC does not regulate Cryptocurrency. Unfortunately having viewed the prospects business plan and considered all the services the client proposes to offer coupled with the non-regulatory state in Belize, we are unable to assist. I have attached a copy of the statement made by the IFSC. Hopefully in the future as we move to digital currency standards, our jurisdiction can offer a licence and full regulation.”

The BVI: “I confirm that a license will be required for such activities. Please review this link on the FSC’s view on such activities https://www.bvifsc.vg/library/guidance-regulation-virtual-assets-virgin-islands-bvi” (We can assist to incorporate the Company and to apply for the license. The incorporation will be $1,350. Our fee for the SIBA application will be $10,00,500 which includes the Government fee of $1500).”

Nevis: ”This will be a matter for the Eastern Caribbean Central Bank. We will have to contact them and get the information. We are not certain how long this will take but will revert to you as soon as we get the information from them. Can you provide more information for us to send to the Central Bank?”

Hong Kong: “We do not on-board clients that issue ICO, run or manage cryptocurrency exchange so we do not have much research in these areas. You may try to find out more information about cryptocurrency licensing at: Securities & Futures Commission: https://www.sfc.hk/edistributionWeb/gateway/EN/circular/doc?refNo=18EC77 Besides, if the company will also serve as a bank, it may also need a separate license from the monetary authority: https://www.hkma.gov.hk/eng ”

St Vincent & The Grenadines: ”Apologies for the delay re your inquiry about a Crypto Exchange formation. The activity is not licenseable in SVG but can operate its business but CANNOT state that it is a licensed entity in SVG for cryptocurrency”

Marshall Islands: ”The Republic of the Marshall Islands Registrar of Non-Resident Domestic Entities as a matter of policy will not form entities that intend to engage in cryptocurrency trading, forex trading, binary options trading, or related business activities. In addition, section 3(6) of the Business Corporations Act requires non-resident domestic entities which carry out activities in another jurisdiction which would be regulated under the Banking Act 1987 if it was operating within the Republic of the Marshall Islands, which includes activities such as Forex, then the entity is required to be regulated by the relevant authorities in the jurisdiction(s) in which the entity carries out those activities and must comply with the laws, regulations, and licensing requirements of those jurisdiction(s). If it comes to the Registrar’s attention that formed entities have violated § 3(6), it will take appropriate action which may include annulment of the entity.”

Dominica: “Thank you for your email. A Cryptocurrency exchange is exempt from functioning under an IBC, Due to the nature of business service. They are prohibited from holding customer cash under a wallet or personalised account. However, I am currently representing a major client in bringing legislation reforms to Antigua & Barbuda for such businesses. The technocrats are now fleshing new legislation for parliamentary approval. I will keep you informed of the progression as it will be a game-changer in the region for such businesses.”

Are you looking to incorporate/set up a Cryptocurrency Exchange? If you’re mindful to go down the Licensing Road you may be interested to know that the following jurisdictions now offer a specific licensing regime for Cryptocurrency Exchanges and or for ICOs: