The stable growth of cryptocurrencies’ profitability arouses great interest from investors. At the same time, the governments of many countries are gradually coming to the opinion that the regulation of the cryptocurrency sphere should become mandatory, because only in this case it will be possible to ensure the safety of assets and prevent fraudulent, criminal phenomena. For this reason, a number of European and other jurisdictions are tightening control and increasing taxation of crypto activities. These and other factors significantly complicate the process of opening a crypto business, especially for small startups with a limited budget. The way out of this situation for many entrepreneurs is to obtain an offshore crypto license – a permissive document for conducting crypto activities in a tax-free jurisdiction.

 

Acquiring a cryptocurrency license is actually quite realistic in many countries, but offshore is often the number one choice for a significant number of entrepreneurs. This is due to the ease of registration, favorable taxation and other reasons. Most offshore zones have staked on the cryptocurrency sector, as they see in it significant prospects for the development of their own economies. Therefore, local governments are doing everything necessary to attract as much foreign investment as possible.

 

Crypto business conditions vary from country to country, and there is no absolutely ideal place to obtain a crypto license. When choosing, you need to base your choice on your goals and type of activity, local legislation, tax peculiarities and other issues. If you are interested in registering an offshore crypto license, we must warn you: this process has certain nuances and peculiarities. It can happen relatively quickly or be delayed in time, require maximum attention to the preparation of documents or imply the need for personal presence, etc.

 

Regardless of the licensing conditions set by the offshore jurisdiction, it is easiest and most convenient to overcome this process with the help of professionals of the Lawrange Attorney’s Association. Our experts are familiar with all the nuances of registration of cryptocurrency licenses in popular offshore jurisdictions. They will advise you which jurisdiction is better to choose depending on your business and budget, help in preparing documentation and provide full support at all stages of licensing.

 

What is an offshore crypto license

Cryptocurrency is digital money without tangible collateral, functioning primarily on blockchain technology. They are characterized by decentralization, increased anonymity and high speed of transactions. The use of cryptocurrencies is possible in trading, investment, financial and other activities.

 

Crypto license, in turn, is a permit to conduct business with the use of crypto-assets. To obtain it, the applicant (individual, legal entity) must meet a number of requirements that differ from country to country. It is possible to obtain a crypto license only in those offshore countries where the status of cryptocurrency assets is established and the regulatory legal framework is functioning. Licensing of cryptocurrencies should not be considered solely as a desire of states to profit from this sphere. In fact, by fulfilling the specific conditions set by the Regulatory Authority of a particular country, entrepreneurs ensure the fulfillment of the rights of each participant of the crypto market (their own, clients, investors). The licensed firm conducts transparent, legal and reliable activities, reducing the likelihood of creating problems for themselves, the state, clients, and partners.

 

The final concept, which is often used in conjunction with cryptocurrencies, is offshore – a territory (country or part of a country), where favorable conditions for business are established in the form of:

 

  • Zero or low taxes.
  • Minimal reporting.
  • The right to conceal the identities of the beneficiaries, etc.

 

“Offshore” does not mean “illegal.” It is just a place where you can open and run a crypto business on favorable terms. Of course, it happens that criminal elements use offshore for illegal activities, however, at the same time, there are a number of offshore jurisdictions that are on the white list of the Financial Action Task Force on Money Laundering (FATF) – an intergovernmental organization for combating money laundering and countering the financing of terrorism. FATF imposes strict requirements, which many offshore companies strive to fulfill. As a result, this raises their prestige and develops trust on the part of international investors and partners.

 

Important! Since traders and investors are at risk of losses due to the high volatility of cryptocurrencies, the decision to register an offshore crypto license is often quite natural. First of all, it is related to the desire to reduce tax costs, because taxes can significantly exacerbate losses in the event of a sharp drop in the crypto exchange rate.

 

Who issues offshore crypto licenses

Crypto activity is regulated by the government, and offshore jurisdictions are no exception. In countries with a low tax burden and other favorable conditions for companies to operate, the issuance of crypto licenses is carried out by government agencies (Regulators). Depending on the country, this may be the National Bank, police, tax authorities or specially created agencies.

 

The duties of the Regulators include, among other things:

 

  • Reviewing applications from licensees, checking them for compliance with requirements and legislation.
  • Issuing universal crypto licenses or for each type of activity.
  • Developing a legal and regulatory framework for regulating cryptocurrency companies.
  • Monitoring the activities of crypto firms, timely detection of violations.
  • Application of various enforcement measures – issuance of instructions, imposition of fines, suspension or revocation of licenses.

 

Advantages of offshore crypto licenses

An important advantage of licensing cryptocurrency activities in some offshore jurisdictions is the creation of the necessary conditions for the protection of all participants in the crypto market. A legalized company carries out transparent, legal and reliable operations. At the same time, the risk of legal proceedings against its owners is significantly reduced. In addition, licensed companies are subconsciously associated with reliability and security, so they have a better chance of increasing their client and investor base. Registering an offshore crypto license also has a number of other advantages.

 

Protection of customer privacy

Registering an offshore crypto license is preferred by many entrepreneurs because of its ability to provide increased privacy for customer data. For example, companies offering investment services in the cryptocurrency market, buying and selling crypto assets, are much better at hiding seller data. This is because offshore jurisdictions do not publish information about beneficiaries and shareholders. Only the data of crypto wallet owners is characterized by public availability.

 

Minimization of tax liabilities

Working with cryptocurrencies through an offshore company is accompanied by the possibility of applying certain tax benefits. For example, often licensed businesses are exempt from tax on:

 

  • profits;
  • capital gains;
  • value added.

 

Also at the disposal of offshore crypto companies is the opportunity to enjoy favorable corporate income tax rates.  Most offshore companies are also supposed to have a simplified scheme for maintaining and filing financial, tax reporting.

 

Cooperation with banks

Cryptocurrency business in any of its manifestations refers to high-risk activities, so illegal cryptocurrency companies do not even count on the possibility of cooperation with banks. Having a license largely solves this problem, especially if the authorization document is obtained in a prestigious offshore jurisdiction.

 

Wide opportunities to provide services

By deciding to obtain an offshore crypto license, an entrepreneur significantly expands the list of services that he will be able to offer to clients. Responding to the relevant requests and requirements of the client base, it will be possible to achieve its loyalty and, consequently, increase the profitability of the company. Such services include:

 

  • exchange of fiat into cryptocurrency and back;
  • selling/buying futures;
  • storage of cryptocurrencies, etc.

 

Saving money

Opening a crypto company in an offshore jurisdiction and obtaining the appropriate license is much cheaper for business owners than if they did it, for example, in European jurisdictions or the United States. Governments of offshore countries set minimal state fees for obtaining licenses, which attracts investors and entrepreneurs from all over the world. In turn, this provides excellent prospects for easy business start-up, especially if you have a limited budget.

 

Mastering global markets

Having an offshore crypto license will allow you to work in the global market – one of the main goals of any serious company. This can only be achieved by licensing the business. In addition, Regulators from other countries treat crypto companies with a license more positively.

 

Types of offshore crypto licenses

Depending on the specifics of the legislation, crypto licenses can be:

 

  • Special – issued in those jurisdictions where the status of cryptocurrencies is clearly defined and all the necessary data are included in the legislation.
  • General – when there are no specific changes in the laws, but the fact of existence of crypto assets is recognized. As a rule, work with cryptocurrency in such countries refers to financial transactions.

 

But still, the main classification of crypto licenses is related to the type of activity:

 

  • Crypto exchanger license – permission to carry out the exchange of cryptocurrency, fiat pairs in different directions.
  • Crypto bank license – with this permission, decentralized platforms have the right to provide banking functions to third parties. This includes storing and exchanging crypto assets, cashing them out, working with cryptocurrency deposits, supporting p2p lending, etc.
  • Crypto exchange license – a cryptocurrency company with this type of permit becomes a financial intermediary between buyers and sellers in exchange transactions, as well as buying and selling cryptocurrency.
  • Custodial license – allows you to provide e-wallet services.
  • Crypto fund license – required for the operation of alternative investment funds based on the use of digital assets.

 

Possible difficulties and risks

Creating a crypto company offshore and obtaining a license involves certain difficulties and restrictions. Despite this, the number of those willing to open an offshore crypto business is steadily increasing. Understanding the main risks will help to avoid many difficulties.

 

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Unforeseen tax liabilities

As a rule, arise due to insufficient elaboration of taxation issues of an offshore crypto company. Despite the absence of taxes at the place of registration of the offshore firm, some jurisdictions impose other government fees, for example, on permanent establishment, source income, etc. It is also important to consider the territorial nature of value added tax (or its analogs).

 

Administrative risks

There is a possibility of being held administratively liable if the offshore cryptocurrency company is actually present not in the territory of the offshore, but in another state. That is, if the staff, office and production facilities are located, for example, in Ukraine, the firm is forced to actually obey local law rather than offshore law. As a result, this may lead to violation of certain provisions of tax and currency legislation.

 

Economic costs

Despite the generally recognized fact of financial affordability of offshore crypto license registration, the risk of significant costs remains in some jurisdictions. Financial costs may be associated with the payment of commissions when registering the authorization, with the cost of intermediary services, e.g. registered representative office, legal advisors. Additional fees and costs are often incurred when documents need to be translated into the official language of the country.

 

Problems with banks

Banks regard cryptocurrencies as a high-risk asset. Consequently, any business activity related to these virtual currencies is also included in the category of high-risk businesses. The situation may be aggravated by the fact that the company is licensed in a low-rated offshore – as a rule, no bank will agree to cooperate with such a cryptocurrency company. And even if this cooperation does happen, you should be prepared for the fact that at any moment unilaterally the banking institution will block the account, refuse to conduct transactions between crypto exchanges, etc.

 

Basic requirements for crypto companies

Each country establishes its own conditions and requirements for applicants for a license, but it is possible to highlight several common, often imposed on cryptocurrency companies:

 

  • Financial risk analysis.
  • Compliance with customer due diligence (KYC) requirements – to discourage financial crimes.
  • Keeping records of suspicious transactions.
  • Having the necessary professional experience of directors, owners and employees.
  • Having an appropriate governance structure in place.
  • Locating an office in the jurisdiction.
  • Registration of the company in a suitable legal form.

 

Important! The regulatory framework for cryptocurrencies continues to evolve, and therefore the requirements and restrictions may vary greatly depending on the type of activity and crypto assets used.

 

Best jurisdictions to get a cryptocurrency license

There are no countries with the best universal conditions for running a crypto business. Each jurisdiction implies its own set of advantages and peculiarities, which should be taken into account when choosing one. At the same time, among the large number of offshore jurisdictions, it is possible to highlight a few that offer the most favorable conditions.

 

Costa Rica

One of the few jurisdictions in the world where employers are allowed to pay their employees in cryptocurrency. It has a stable political atmosphere and one of the best online infrastructures in Latin America. In fact, a fiber optic network connects the entire country, providing optimal internet connectivity for local tech companies.

 

Crypto is not considered a foreign currency in Costa Rica, hence it is not subject to the provisions of the Law on Free Currency Conversion. Although cryptocurrencies are generally tax-free, the exchange of foreign currency for cryptocurrency may be subject to a fee. A prerequisite for obtaining a crypto license in Costa Rica is to register a legal entity and physical office in the country, and to comply with AML/KYC.

 

Gibraltar

One of the popular jurisdictions for running a crypto business. Although cryptocurrencies are not considered a means of payment here, crypto exchanges are recognized as legal. Gibraltar is characterized by no tax on crypto, capital gains or dividends. The license for cryptocurrency in Gibraltar is called Digital Ledger Technology (DLT). It requires an initial application, which costs £2,000.

 

Singapore

A city-state practicing a friendly attitude towards cryptocurrencies, which are not considered legal tender here either. However, crypto has the status of a “commodity”, so Singapore applies the appropriate tax to crypto assets – on goods and services (analogous to value-added tax). There is an annual payment of a government fee and mandatory compliance with strict AML policy standards. For this reason, a crypto license in Singapore is particularly popular among entrepreneurs.

 

Curaçao

Securing a crypto license in Curaçao is a strategic decision for those interested in working in the crypto industry. The country’s favorable tax regime, liberal economic policies, and well-developed financial sector have made it a popular destination for cryptocurrency-related businesses. Curaçao does not regulate cryptocurrencies, and no specific prohibitions exist here. However, a new law (LOK 2023) is being introduced to control this area. A provision allowing the exchange of cryptocurrencies until comprehensive crypto requirements are implemented will be included in the current legislation. In addition, the law will authorize the gambling industry to send and receive payments in cryptocurrency (with the expectation that the law will be amended in the future).

 

The Curaçao Gambling Authority (CGA) will be established as the new regulatory body to enforce compliance and regulate license holders. Right now, gambling companies can obtain a Curaçao crypto license from the country’s regulatory body for gambling-related activities, the Curaçao Gambling Control Board (GCB). With over two decades of experience, the GCB is one of the most respected licensing organizations in the world. The most challenging aspect of obtaining a crypto license in Curaçao is the rigorous due diligence process. The GCB adheres to strict standards and conducts exhaustive investigations to ensure that license applicants have no criminal background.

 

Application process

Each jurisdiction sets its own procedure for obtaining a crypto license, but there is a common principle for all countries:

 

  • Registration of a legal entity – this can be the foreign equivalent of a public joint stock company, partnership and other organizational and legal forms stipulated by the laws of a particular country.
  • Employing the necessary staff. Also, depending on the country, it may be necessary to hire an AML officer responsible for the control of a particular company and a Compliance officer through whom communication with clients and regulatory authorities will take place.
  • Acquisition and installation of necessary programs and hardware solutions to form the IT structure of the legal entity.
  • Preparation of documents and their submission to the Regulator. The list of basic documentation includes, among other things, the company’s registration certificate, passports of beneficiaries, financial statements, business plan and other documents that may be required by the Regulator of a particular country. The application to the Regulator is submitted either through a special online platform or directly at the office.

 

Depending on the country, it may take from 1-2 weeks to 3-4 months on average to process an application. At the same time, in any case, license registration is accompanied by payment of state fees and duties.

 

Why you should choose Lawrange

Our law firm specializes in providing assistance in processing crypto licenses in offshore jurisdictions. Working with different countries, we have extensive experience and all the knowledge needed to successfully navigate the licensing process. Our experienced attorneys and lawyers are familiar with the aspects of corporate law in many offshore jurisdictions, which eliminates the risk of difficulties with the law when applying for crypto licenses. Over the course of its activity Lawrange S.A. has successfully assisted hundreds of clients. You can also be personally convinced of the main advantages of cooperation with us:

 

  • Professionalism.
  • Responsibility.
  • Always in touch.
  • Individual approach.
  • Saving time, financial costs.

 

Our specialists will assist in choosing the appropriate jurisdiction and preparing documents, provide information on the peculiarities of the procedure of crypto license registration, and can accompany all stages of registration.

 

Contact us in a convenient way, if you need more detailed advice on the issue of crypto licensing in the offshore zone.

 

Conclusions

Crypto licensing in offshore jurisdictions can be extremely useful for entrepreneurs and investors who want to save money on registration and still get a number of advantages: favorable taxation, access to the global crypto market, wide opportunities to provide services, etc.

 

To obtain an offshore license for cryptocurrency, it is necessary, at a minimum, to be guided in the legislation of the country of interest and registration features. Also important is the availability of financial, tax, language knowledge and a sufficiently large amount of free time. In this case, registration of a crypto license in the offshore zone can be successful. Otherwise, there is a risk of making mistakes that can lead to a delay in the process and difficulties with the law. You can save yourself from worrying and spending unnecessary time and money with the help of Lawrange Law Office. Our specialists provide detailed advice and full support of all stages of registration, ensuring successful licensing in the offshore of interest.

 

FAQ

How long is an offshore crypto license valid and what procedures are required to renew it?

The validity period of offshore crypto licenses can vary from 1 year to 3-5 years, there are also variants of indefinitely valid licenses, which depends on the jurisdiction. Generally, a set fee is required to renew licenses.

 

How can an offshore crypto license affect the tax situation of a company and its clients?

Having such an authorization document allows a company to significantly reduce its tax burden. For clients, it can also bring certain benefits, for example, in the form of lower commissions when using the company’s services.

 

Who can obtain an offshore crypto license?

Legal entities that are engaged in providing crypto exchange services, fiat, or, for example, pay salaries in cryptocurrency to their employees, or manage the finances of third parties, etc. can obtain such a license. And since an offshore crypto license, as a rule, costs an order of magnitude cheaper than in most European jurisdictions, its acquisition will be especially beneficial for small, young businesses with a limited budget.

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