Crypto-licensing in the EU


During the past few years crypto-sector developed significantly. Nowadays such business partly replace demand for venture capital investments and capital markets investments.

Investors have noticed a new turn of quotes of digital assets after a long “cryptocurrency winter”. Financial regulators (including the International Monetary Fund) perceive cryptocurrencies in a more positive way now, and analysts predict new historical highs in bitcoin prices in the near future. Cryptocurrencies have again become part of the public agenda: they are discussed in the parliaments of different countries, they are criticized or praised by politicians — even US President Donald Trump mentioned this phenomenon on his Twitter.

Partner of the international company Legal Welt, PhD, Attorney-at-law Sergii Malomuzh, has analyzed the current and upcoming regulations of the European legislation for cryptocurrency sector for us.

There are a few countries at the EU implemented crypto-licensing to attract crypto-business and make it safer for users. These are Switzerland, Estonia, and the UK which issue e-money license. Some countries, e.g. Portugal — excluded crypto-currencies and income from taxes at all.

The biggest news of 2020 for crypto-currency market that 5th Anti-money Laundering Directive (5AMLD) is coming into force from the 10th of January 2020.

The Directive is also designed against terrorists who may transfer money into the EU via crypto-currency transfers. The Directive applies to providers of exchange services of crypto/fiat currencies as well as to e-wallet providers. Implementation of 5AMLD into national law of each EU country will help to develop monitoring of crypto-activity and bring less anonymity to the sector.

Article 47 of the Directive says: “The Member States shall ensure that providers of exchange services between virtual currencies and fiat currencies, and custodian wallet providers, are registered, that currency exchange and cheque cashing offices, and trust or company service providers are licensed or registered, and that providers of gambling services are regulated.

However EU States are able to choose how to execute the rules by themselves.

But it still remains that if any state decide to issue a crypto-license — it will be valid on the territory of this country ONLY.

Mainly, there are two ways countries choose to regulate crypto:

  1. Registration

Registration procedure is easier and intend to create a registered of crypto-companies. For that purpose a provider shall register with the appropriate authority. This way will work in Sweden, the Netherlands, Slovenia, France, etc. More likely the procedure will be in English language.

  1. Licensing

The pioneer of licensing is Estonia, which established operating crypto exchange license and virtual wallet providers license in early 2017, but only made it available for companies registered in Estonia. After 5AMLD implementation it could become available for companies from other countries.

Thus, business in the cryptocurrency sector requires experienced approach and a detailed study of the advantages of jurisdictions for the further registration of a company. Using Legal Welt consultants you will get professional tax advice and help with the choice of jurisdiction to bring your business to the international market, as well as supported with your crypto license there.

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