If you plan to work with virtual assets in the European Union, then you need to obtain a cryptocurrency license for your project. That is, authorization to carry out such activities in a certain European jurisdiction.

 

The term VASP (Virtual Asset Service Provider) was introduced in 2019 to refer to service providers in the cryptocurrency sphere.

 

Companies that hold a cryptocurrency license can provide services for:

 

  • exchanging cryptocurrencies for fiat money or vice versa;
  • exchange between different cryptocurrencies;
  • safekeeping of cryptocurrency assets on behalf of clients;
  • processing cryptocurrency payments;
  • cryptocurrency portfolio management, including counseling and strategic planning;
  • token placement;
  • digital currency issuance, etc.

 

Among other things, they can provide expertise and advice on cryptocurrencies and regulatory requirements.

 

Benefits of Obtaining a Crypto License in Europe

The VASP allows virtual services companies to operate legally in the European Union. The license makes the cryptocurrency business transparent and increases the trust of customers and partners. Companies with a Europe crypto license have a wide range of opportunities to provide services in the field of digital assets.

 

Many European countries have a mature regulatory framework but with stricter application procedures, high supervisory fees, and substantial initial capital requirements.

 

Other European countries are in the early stages of developing their regulatory frameworks and, therefore, have more lenient requirements for cryptocurrency license applicants, as well as low fees and initial capital requirements.

 

Regulatory Compliance

Having a crypto license in Europe demonstrates to its clients and partners its commitment to high AML (Anti-Money Laundering) and CFT (Countering the Financing of Terrorism) standards, which increases its credibility and inspires trust.

 

Market Access

The VASP license allows businesses to legally provide services related to the circulation of virtual assets in countries where it is officially recognized. This gives businesses access to new and promising markets.

 

Financial Benefits

Europe crypto license makes a company more attractive to investors, because it confirms not only the legitimacy of the business, but also its compliance with standards. Also, VASP allows providing a wide range of services related to virtual assets, which can significantly increase the company’s revenues.

 

Operational Efficiency

Crypto license in Europe (VASP) provides end-user protection, which is important for long-term operations. VASP companies also get access to expert support and necessary resources that help them to actively develop their business in compliance with local legislation.

 

European Regulatory Framework for Crypto Assets

In 2023, the European Parliament approved the MiCA (The Markets in Crypto Assets), a global legislative framework to regulate cryptocurrency asset markets.

 

The adoption of MiCA was also aimed at:

 

  • ensuring a uniform licensing regime for all states that are members of the European Union;
  • regulating the provision of cryptocurrency-related services that are not subject to other European Union rules.

 

The independent intergovernmental organization FATF (Financial Action Task Force on Money Laundering) made recommendations in 2018 to implement anti-money laundering and counter-terrorist financing. These additions made AML and CFTs an integral part of cryptocurrency-related financial activities.

 

The EU regulatory framework that governs the cryptocurrency market includes more than just MiCA. This includes the Anti-Money Laundering Directive, the Markets in Financial Instruments Directive, etc.

 

Key Requirements for VASP and CASP

Note at the outset that FATF refers to those companies that provide virtual asset services for or on behalf of a third party as VASP virtual asset service providers. MiCA describes such companies as Crypto Asset Service Providers (CASPs).

 

Conducting cryptocurrency activities involves compliance with AML requirements.

 

The following important measures must be compulsorily carried out by the license-holding companies:

 

  1. Identification of all customers as per KYC (Know Your Customer) requirements to verify their legitimacy and links to criminal activities.
  2. Monitoring of all transactions and setting limits on amounts.
  3. Assessing the risks that are associated with criminal financial schemes and taking measures to mitigate these risks.
  4. Developing a rule to regulate procedures and compliance measures.
  5. Employees will be trained on the basics of legislation and procedures to counter criminal financial schemes.
  6. Keeping records of clients and their financial transactions for a certain period of time, ensuring that they are available for inspection by authorized bodies.
  7. Reporting on its activities in the fight against illegal money fraud.
  8. Informing supervisory authorities about suspicious transactions and unusual transactions.

 

Cryptocurrency companies must also:

 

  • Have an impeccable reputation of the director, founders, and beneficiaries;
  • have a competent AML officer (Compliance Officer) or MLRO (Money Loundering Reporting Officer) to report suspicious transactions to the regulatory authority.

 

VASPs may also be subject to additional conditions (depending on the country), which may include:

 

  • minimum amount of authorized capital;
  • availability of a local office, etc.

 

Including the involvement in the company of residents of the state where the registration was made: director, AML officer and MLRO.

 

Types of Crypto Licenses

At the moment, there are two types of cryptocurrency licenses in Europe:

 

  1. Specialized type. These licenses allow the exchange of cryptocurrencies for fiat money.
  2. Traditional type. Such licenses are required for companies providing ordinary financial services if they want to work with cryptocurrency in addition.

 

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The choice of type may be influenced by the type of services provided by the company, as well as the legal regulation of the country where the company will directly operate.

 

Top European Countries for Crypto Business

European Union member states are obliged to implement AML/CFT directives in their national laws. This does not depend on the stage at which the jurisdiction’s cryptocurrency legislation is at. Each country has a special body that oversees the activities of such companies and their compliance with AML/CFT requirements.

 

Poland

The Polish legal framework is at the stage of developing regulation of the cryptocurrency market, but even so, the business environment here is quite strong. Companies must register with the state register of cryptocurrency companies in Poland. The procedural requirements in this jurisdiction are straightforward.

 

Currently, cryptocurrency companies operate within a general regulatory framework, and they should be prepared for the introduction of stricter laws.

 

Advantages of obtaining a crypto license in Poland:

 

  • No need for a physical office and local staff.
  • No periodic supervision fees.
  • Low authorized capital.
  • Low income tax.
  • Fast registration.
  • Mandatory audit only if the cryptocurrency company fulfills at least two of the following conditions:
  1. Annual net income exceeds PLN 23.4 million.
  2. Annual turnover exceeds PLN 11.7 million.
  3. The number of full-time employees is at least 50 for the year.

 

Poland has signed bilateral agreements with 84 countries to avoid double taxation and has signed the status of a favorable jurisdiction for cryptocurrency business in terms of taxation.

 

Slovakia

There are two types of crypto licenses for the legal operation of virtual asset companies in Slovakia:

 

  • Cryptocurrency exchange license;
  • a license that allows the maintenance and storage of a cryptocurrency wallet.

 

Strict AML requirements and KYC regulations apply to the regulation and licensing of such activities.

 

All profits that have been generated from cryptocurrency transactions are subject to taxation in Slovakia. But even despite the strict rules, cryptocurrency licensing in Slovakia remains attractive to investors for a number of reasons:

 

  • there are no citizenship requirements;
  • no capital controls;
  • no currency controls.

 

There is also the possibility of tax incentives for companies operating with virtual assets in Slovakia.

 

Lithuania

Lithuania attracts attention with its cryptocurrency legislation and procedures that favor innovation. The country offers transparent and efficient mechanisms for obtaining cryptocurrency licenses, as well as competitive tax rates. Lithuania is open to international investment, which makes it attractive for cryptocurrency transactions.

 

The process of obtaining a crypto license in Lithuania is fast and without strict bureaucratic requirements. The state has already implemented some principles of the MiCA Directive. The following distinguishes this jurisdiction: the possibility of paying the entire amount of the share capital in installments.

 

Two types of cryptocurrency licenses can be obtained in this jurisdiction:

 

  • virtual currency exchange operator;
  • virtual currency wallet depository operator.

 

Lithuania is an ideal choice for companies looking for a quick start. There are no residency requirements for directors and shareholders.

 

Czech Republic

The Czech Republic now has a simplified process for registering a business and obtaining the necessary licenses to operate with virtual assets. The jurisdiction has a fairly stable economy and a high level of investment protection.

 

There is no special license for cryptocurrency business in the Czech Republic. In order to operate legally, it is necessary for a company to be registered in the Register of Trade Licenses. This allows the business to operate in any country of the European Union.

 

There are less stringent financial and operational conditions from local authorities than in many jurisdictions.

 

The main reasons for obtaining a crypto license in the Czech Republic:

 

  • minimal authorized capital requirements;
  • no annual supervision fees;
  • no need to register a physical office;
  • audit exemption for companies that fulfill at least two of the following criteria:
  1. Turnover is less than €3 million per year.
  2. Total assets do not exceed €1.6 million.
  3. The average number of permanent employees is not more than 50.

 

Cryptocurrency companies in the Czech Republic can also benefit from general tax incentives.

 

Getting a Cryptocurrency License in Europe

The cryptocurrency licensing procedure can vary greatly depending on the country of registration. It is important to carefully analyze the legal framework and requirements in the specific jurisdiction where you plan to operate.

 

In general, the process of obtaining a crypto license in Europe includes the following steps:

 

  1. Selection of the jurisdiction (requirements for the legal form of organization, the size of the share capital, the residency of the founders, the reputation of the directors and beneficiaries, the number of shareholders, etc.).
  2. Company registration.
  3. Collect and prepare of the necessary documents for the issuance of a cryptocurrency license.
  4. Opening a corporate account in a bank of the chosen jurisdiction.
  5. Hiring specialized AML and Compliance staff (certified employees with experience and reputation in finance and virtual assets).
  6. Developing and implementing in-house security and customer data protection policies.
  7. Preparing the software and hardware required for the operation.
  8. Applying for a license.

 

After passing all stages of verification, the company receives a cryptocurrency license.

 

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Choose the Jurisdiction

Each jurisdiction has both advantages and pitfalls. Therefore, it is necessary to carefully study the legislation of a particular country in order to pick the best option.

 

The choice may depend on:

 

  • the type of activity of the company;
  • the financial capabilities of the founders;
  • the business plan.

 

For example, in the Czech Republic, although there is a strict policy, with a license of this jurisdiction, you can work in all EU countries. It gives more freedom in the range of services and has a number of other advantages. The choice between Lithuania and the Czech Republic should be based on an analysis of business objectives and preferences regarding the regulatory environment.

 

Poland, the Czech Republic, and Slovakia are suitable for those who prioritize saving money and are willing to adapt their cryptocurrency company to changing regulations.

 

You should also consider the country’s tax policy, possible scalability of the business, availability of professional services, etc.

 

Compliance with AML/KYC Regulations

Successfully obtaining a crypto license in Europe (VASP) implies full compliance with AML/KYC requirements, which include:

 

  1. Develop an internal AML/KYC policy and implement it along with internal control procedures.
  2. Conducting identity checks on all clients.
  3. Identification of ultimate beneficiaries (for legal entities).
  4. Monitoring transactions to identify suspicious activity.
  5. Informing relevant authorities of suspicious transactions.
  6. Compliance with international sanctions requirements.
  7. Storing customer data for the legally prescribed time.
  8. Recruitment of qualified personnel responsible for compliance with AML/CTF requirements.

 

These measures ensure security and transparency of transactions with virtual assets and allow the company to comply with international standards.

 

Register Your Business

The company must be registered in the jurisdiction where the VASP license is to be obtained. This means submitting the necessary documents to the regulator of the chosen country, as well as paying all registration fees.

 

For example, in Lithuania and Estonia it is possible to register a private company to obtain a license, and in Ireland it is possible to register a private limited company. In Germany, the most appropriate form for cryptocurrency activities is a limited liability company.

 

Each jurisdiction in Europe has its own requirements and procedures, so it is important to consult with experts to find the most suitable option for your business.

 

Regularly Report

Companies that hold cryptocurrency licenses in Europe are required to submit the following reports to the supervisory authorities on a regular basis in accordance with the regulations:

 

  1. Financial statements (balance sheet, income statement).
  2. Information on all transactions with virtual assets in the form of transaction reports.
  3. AML/CTF compliance reports.

 

Tax Regulation

Along with the regulation of cryptocurrency transactions at the legislative level comes taxation, which may differ from jurisdiction to jurisdiction.

 

For example, Poland has a fairly low tax on profits, which is only 15%. If the company’s income did not exceed PLN 9.4 million in the previous financial year, the tax will be only 9%.

 

Purchase an Existing Crypto License

Buying an existing company with a crypto license is a strategic step for those entrepreneurs who want to enter the cryptocurrency market quickly.

 

In this case, there is an opportunity to avoid long and complicated procedures of registration and licensing of a new company, as well as unnecessary expenses associated with these processes.

 

The Cost of Obtaining a Crypto Exchange License

The cost of obtaining crypto license in Europe may vary depending on the chosen jurisdiction. There are relatively expensive licenses and there are more budget-friendly ones.

 

Among other things you need to take into account government fees, the amount of authorized capital, the cost of renting an office, staffing, software and purchasing equipment, which also affects the overall budget.

 

Why You Should Contact Lawrange

You can apply for a cryptocurrency license in the jurisdiction of your choice on your own, but then you are bound to encounter various legal complexities and unresolved issues.

 

Each specific situation is individual, so it is important to approach the issue thoroughly. Contact the specialists of Lawrange for legal counselling. This allows you not only to save money, but also not to waste your valuable time.

 

Our company has extensive experience in supporting crypto projects and blockchain startups in the European Union. We closely follow the news of the cryptocurrency industry and carefully monitor changes in legal acts and international AML/CFT standards. Our experts will help in solving the most complex and non-standard tasks related to obtaining a crypto license in Europe.

 

Conclusions

The VASP license is an essential tool for regulating the activities of all virtual asset providers. It allows not only to make the cryptocurrency market safer for clients, but also tightens measures to combat financial crime.

 

Also, the introduction of international principles of information exchange and cooperation ensures global transparency in this sphere.

 

FAQ

Is cryptocurrency legal in Europe?

Cryptocurrency and its use is absolutely legal in Europe. Its legal status and regulation may vary from country to country.

 

How long does it take to process a VASP license application in Europe?

The processing of a VASP license application in Europe depends on the country and the readiness of the documents. On average, it can take up to several months to obtain a license.

 

How often do I need to renew my VASP license, and what is involved in the renewal process?

In most European countries, cryptocurrency licenses are issued for an indefinite period of time.

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