Today’s cryptocurrency activity interest is huge, especially in the US and European countries. People are increasingly using crypto assets for trading and paying for goods and services here. This leads to the fact that every year there are new organizations. To open your organization, you should get a license crypto exchange. This will allow you to work honestly and openly and attract new users and investors.
Is there a license for cryptocurrency trading?
Cryptocurrency trading itself is not licensed and is not a regulated activity! It is essential because even the European banking and exchange supervisors emphasize that, in most cases, cryptocurrencies are outside the scope of legal regulation. In most but not all cases.
While there are no separate regulations or licenses that cryptocurrency exchanges must obtain, most virtual currency exchanges provide payment services. The payment services, in these cases, really concern currencies (fiat) and not the cryptocurrencies themselves. It is transactions and storage of funds in zlotys, euros, or dollars subject to legal regulation. In such cases, an appropriate payment service provider license may be required.
When does a cryptocurrency exchange need a license to provide payment services?
Cryptocurrency exchanges and exchangers usually perform at least two activities reserved for payment service providers. Above all:
• They act as intermediaries in the transfer of real currencies (FIAT) between users, which in principle, constitutes a payment transaction within the meaning of the Payment Services Act.
• They manage so-called Real Currency Virtual Wallets/Balances. Funds from these balances can be transferred to other users, for example, to buy cryptocurrencies, which can be a payment account.
Making money transfers and maintaining payment accounts are activities reserved for authorized persons – the so-called payment service providers. Such a supplier must comply with several legal requirements, including obtaining permission or entering the appropriate register – licenses. In Poland, the decision on this issue is issued by the Polish Financial Inspectorate.
Does a stock or currency exchange always need to be licensed?
No. And it is necessary to defend this point of view – especially for money changers. As long as they do not mediate the transfer of fiat between users or maintain accounts (virtual wallets, balances) to purchase assets from other users, neither PSD2 nor the Polish Payment Services Law will apply.
However, most virtual currency exchanges and many exchangers carry out “limited” activities – they transfer money between users or maintain payment accounts for these users. In this case, it will be necessary to “knock” at the KNF for the appropriate license.
It is essential to note whether a given organization should have a license is highly debatable. The CNF enters the list of public warnings and notifies the prosecutor’s office if it suspects that the subject should have a permit. Suspicion is underlined.
A general warning entry does not mean that the law has been broken, nor does it mean that someone should have a license and not. That is, KNF suspects that in one case or another, there should be a license, but there is none. And the prosecutor will explain.
For small businesses, this means, in practice, the end of existence because this often leads to the termination of bank account agreements – and banks very quickly and effectively terminate such accounts to someone on the list of public warnings.
What license should a cryptocurrency exchange have?
Virtual currency exchanges must account for two PSP licenses:
• small payment institution;
• national payment institution.
The first is the ideal license to start with. The low cost of obtaining it (including legal services) and the length of the proceedings make it available for almost every cryptocurrency exchange. Almost any, because it has some limitations.
First, the turnover on payment transactions can be at most 1,500,000 euros per month. In addition, the user’s payment accounts cannot hold more than 2,000 euros at any given time. Mainly the latter limitation is often referred to as a deal breaker.
In practice, only some exchanges contain such small amounts for their users, even if they are fiat currencies. From customer experience, it has been observed that users often want much more significant cuts to remain on their balance sheets.
How to get a cryptocurrency license for an exchange?
Running a small payment institution requires a series of activities and procedures. First, MIP must protect funds from users (not mix with other funds) and have proper anti-money laundering procedures. In addition, you must have a risk management system (simplified), a business plan, complaints procedures, and several other mechanisms to ensure that users are adequately protected.
Also important, often forgotten, are the correct agreements with users (for example, regulations) and compliance with the rules after obtaining a license. Like any other payment service provider, a small payment institution must remember that it is subject to specific provisions and obligations under the Payment Services Act and other regulations, such as EU money transfer rules.
Is it worth getting licenses abroad?
If you do business in Poland and live in this country, then a national license should be a natural choice. First, it will be a much cheaper solution. Secondly, our overseer is not as evil as they are painted. Thirdly, in the case of IIP, KNF works quite effectively.
In addition, domestic banks are reluctant to open accounts to unknown persons from Lithuania, Latvia, or Estonia (even if no one officially talks about it, the popularity of Baltic licenses negatively affects the credibility of persons who have received permits there). If you are a small and well-known structure, then the very activity in virtual currencies certainly complicates your relationship with banks.
Services of our company
The process of obtaining a license is quite complicated, so you can only do it with the choice of professionals. The specialists of our company have the necessary specialized education and extensive experience in this field. They know how to help you get a work permit in the shortest possible time. The list of our services includes:
• assistance in choosing jurisdiction;
• registration of necessary papers;
• search for an office and local employees;
• opening a bank account;
• verification of readiness for licensing.
If you decide to get a work permit in another country, you do not need to fly here in person. You need to issue a power of attorney to our specialists and send them the necessary documents in electronic form. They will do the rest of the work for you.
The rules for obtaining a crypto license are highly dependent on the jurisdiction you have chosen. First, you need to register a company in the selected country, and then make sure that your company meets the requirements of government agencies, open a bank account, collect a package of necessary documents and apply for a work permit. The simplest licensing rules are in Poland, but the fastest way to get a work permit is in Lithuania.