Money transmission, including cryptocurrency exchanges and trading platforms, is a highly regulated sector. This is because fraud is always a possibility when moving money between parties. Crypto, especially, has gained popularity among certain criminal elements. This is attributed to its high encryption capability of transaction data. 

Licensing cryptocurrency trading platforms and exchanges discourages using blockchain technology to support illicit activities. These may include terrorism funding and money laundering. 

A cryptocurrency exchange license gives your company legitimacy and can help you draw in additional traders and investors. It also encourages compliance, which gives your transaction legitimacy. We’ll go over all you need to know about crypto exchange licenses below:

A cryptocurrency license in a nutshell

This permit lets you maintain digital wallets, provide custodial services, conduct trades, and offer brokerage services. Regulatory authorities grant it. Put another way, a crypto trading license authorizes you to provide particular services in the market. 

Establishing a decentralized exchange and function without obtaining a formal license is technically possible. But without a license, you might not be able to get money from investors. You may also not get collaborations with trustworthy liquidity providers. Additionally, your company may be subject to penalties based on your jurisdiction. This can drastically reduce your earnings. 

Who needs a crypto license?

Companies that provide cryptocurrency-related services usually require a license to function lawfully. Here are some of them: 

• Crypto exchanges that let users trade crypto for cash or other digital coins.
• Custodial services that hold digital assets on behalf of customers.
• VASPs, or virtual asset service providers that deal in cryptocurrencies and are subject to anti-money laundering and counter-terrorism funding regulations. 
• ICO (Initial Coin Offerings), token sales, and token legalization. These sell digital tokens to raise money. They must register their offering and get a crypto license. This is especially essential if the tokens are securities.
• Financial Services Providers (FSPs) that offer services associated with cryptocurrency assets. 

How to obtain a crypto license

You must register a legal entity in a nation and fulfill all legal and regulatory requirements to receive a crypto license. This procedure entails: 

Choose a jurisdiction

Decide on a jurisdiction that suits your business strategy. Consider the nation’s tax laws, VAT, accounting standards, and reporting obligations. 

Create a legal entity

Create a company account in the nation of your choice. 

Compile the documents

Gather all the relevant documentation for your company, including:

• A business plan
• Proof of capital 
• Policies for compliance, including AML and KYC protocols 
• Details regarding the company’s shareholders and directors 
• An in-depth explanation of the business’s operations 
• The business’s webpage 

Designate a compliance officer

A compliance officer and a representative will provide paperwork to government offices. This will significantly expedite registration. 

State fee payment

Make the required payment. 

Await the license

At this point, be patient and wait for the issuance of the cryptocurrency license. 

A key takeaway

Keep in mind that different jurisdictions may have different requirements. It’s critical to exercise diligence and seek advice when obtaining a crypto license. Legal and financial professionals will guarantee the smooth incorporation and running of your business.