The registration of cryptocurrency companies in favourable foreign jurisdictions remains a popular trend in the modern corporate landscape. However, despite the prevalence of this trend, business owners must remember that the cryptocurrency industry is a regulated space, with requirements varying by jurisdiction. Choosing where to establish a cryptocurrency entity thus constitutes an important strategic decision, as not all countries have embraced virtual assets as an integral component of technological advancement and enacted clear laws rendering cryptocurrency activities permissible. Several key considerations should guide the choice of an optimal jurisdiction for registering a crypto business:
Regulatory posture toward cryptocurrencies
Since the emergence of cryptocurrencies, the crypto sphere has been associated with ideals of complete decentralization and freedom from government oversight. However, as the popularity and adoption of cryptocurrencies expanded, authorities in numerous countries began developing formal regulations addressing cryptocurrency markets and uses. Primary rationales for governmental interest in crypto regulation include:
- Combating illicit activities like money laundering and illegal transactions
- Safeguarding investor interests in crypto projects
- Preserving financial stability
- Promoting transparency and legitimacy within the cryptocurrency market
Countries have adopted divergent approaches to cryptocurrency regulation. Some states, such as China, have instituted outright bans. Others have taken favourable views of cryptocurrencies, conferring a degree of legal status upon them. However, even under such receptive frameworks, restrictions may still apply; for instance, mining cryptocurrencies may require licensure. Kazakhstan exemplifies this type of conditional permission. Many jurisdictions, including the United States, have designated cryptocurrencies as investment assets or commodities subject to taxation. Overall, most nations have pursued legalization pathways. Obtaining a crypto operating licence is therefore essential for conducting legal cryptocurrency business activities across regulatory environments.
Key stages in launching a global cryptocurrency business
Choosing the appropriate legal and corporate structure constitutes a pivotal foundation for a successful cryptocurrency startup, particularly for entities seeking to furnish services worldwide. In tandem with legal counsel, founding a cryptocurrency company entails progressing through the following stages:
- Consultation phase: business structure, leadership rights and responsibilities are delineated.
- Jurisdiction and business entity selection: an optimal jurisdiction and statutory business form are chosen in alignment with the venture's strategic priorities.
- Registration formalization: necessary legal documentation is prepared and submitted per the requirements of the selected jurisdiction's company registry, alongside payment of registration fees.
- Licensure application: documents and petitions are compiled and filed to secure relevant cryptocurrency operating licences.
- Banking services procurement: a financial institution or payment provider is selected to host a corporate account for the cryptocurrency entity.
Launching an international cryptocurrency business constitutes a complex, labor-intensive process, as individual countries' regulatory and company registration regimes feature localized specifications. Engaging professional advisors well-versed in supporting cryptocurrency ventures can therefore prove indispensable. Experienced specialists can capably navigate unique jurisdictional dynamics to help bring a compliant global cryptocurrency enterprise to market.
Criteria for selecting a favourable jurisdiction to establish a cryptocurrency business
The legal status of cryptocurrencies varies substantially across national jurisdictions. While some states have tightened oversight, others actively encourage crypto-based projects and transactions. When assessing prospective countries for launching a cryptocurrency venture, several key criteria should be analysed:
Regulatory environment
- Clear, flexible legal frameworks regulating cryptocurrency activities
- Preferential tax regimes for crypto transactions
- Stable legal systems and investor protections
- Access to banking services for crypto companies
- Robust consumer safeguards against fraud/exploitation
Government support
- Policies and initiatives fostering blockchain innovation
- Incentives for attracting crypto businesses
- Investments in technological infrastructure and education to expand the talent pool
Attitude toward coin offerings
- Regulatory clarity around ICOs
- Pathways for companies to raise capital through ICOs
To identify an optimal jurisdiction for registering a cryptocurrency entity, retaining advisors with specialized expertise in diverse international crypto regulations proves instrumental. Qualified counsel can provide guidance on regulatory considerations across countries and assist with navigating the crypto business registration process.
Assessing top jurisdictions for registering a cryptocurrency business in 2024
With interest in launching cryptocurrency ventures remaining robust, many entrepreneurs are evaluating optimal jurisdictions for registering crypto companies. When analysing prospective countries, key considerations include the regulatory climate as well as tax policies and incentives.
European Union
Within the EU, the new MiCA regulations come into effect in 2024, furnishing a harmonized regulatory framework for digital asset markets across the bloc. Under MiCA, crypto companies must register as VASPs to directly offer services in a given country. Securing VASP registration entails thorough vetting of a company's business model, compliance protocols, and conformity with anti-money laundering and know your customer stipulations.
Malta
Hailed as a leading global financial services hub, Malta garners substantial attention as a favourable crypto jurisdiction. The Maltese government pioneered the world’s first bespoke cryptocurrency regulatory regime, engendering significant legal clarity.
Malta’s VFAA norms furnish comprehensive clarity and investor protections around crypto endeavours.
While licence fees prove substantial, opening a cryptocurrency company in Malta is very promising, since the country offers a relatively attractive tax environment including refund mechanisms that can effectively reduce income tax liability.
In light of its regulatory leadership, Malta has successfully attracted top-tier industry players like Binance, the world’s highest-volume cryptocurrency exchange. The country's embrace of blockchain innovation has earned it the moniker “Blockchain Island”. For entrepreneurs interested in launching a compliant crypto startup in Malta, engaging local specialists can provide optimal support in navigating the country's regulatory landscape.
Switzerland
Boasting a longstanding reputation as a global financial hub, Switzerland has also emerged as a leading crypto-friendly jurisdiction, home to “Crypto Valley” in the canton of Zug. Since accepting Bitcoin for municipal payments in 2016, Zug has become a nucleus for blockchain innovation, attracting major industry players.
Swiss banks were pioneers in providing business accounts for cryptocurrency companies, enabling legitimate firms to access essential banking services while filtering out dubious actors. Regulatory developments have also encouraged crypto startups, with fintech licensing pathways introduced in 2019 allowing deposit processing up to $100 million. Alternatively, Switzerland's sandbox framework enables testing nascent business models without full licensure.
Swiss authorities have enacted several milestone crypto regulations. All companies executing financial transactions require registration with the FINMA. While FINMA itself sets no specific crypto requirements, other Swiss statutes mandate AML/CFT controls for trading platforms.
Tax treatment of cryptocurrencies is quite favourable, regarding them as assets. Private, non-professional trading escapes capital gains taxes, while income from professional digital asset market-making does incur taxation.
Estonia
Estonia has cultivated a reputation as a jurisdiction amenable to cryptocurrency innovation, with proactive government adoption of digital services and exploration of a proposed national digital currency, Estcoin. The country's e-residency program, which furnishes easy remote access to Estonia's e-governance infrastructure for global entrepreneurs, has attracted growing crypto interest. Other initiatives like Startup Visa and Digital Nomad Visa further incentivize business migration and encourage foreign entrepreneurs to register cryptocurrency companies in Estonia.
Estonian banks have also embraced cryptocurrencies more extensively than regional counterparts; for example, LHV Bank launched a blockchain-based euro stablecoin wallet.
Tax treatment of crypto activities in Estonia is generally favourable – while ordinary income and capital gains taxes apply, value-added tax exemptions exist for buying/selling cryptocurrencies and mining activities.
However, Estonia has moved to tighten regulatory requirements around cryptocurrency firms:
Licensure conditions
- Local residency mandated for board director
- Requirements to hire in-country staff overseeing AML compliance
- Stricter standards around minimum capital, auditing and reporting
Scope of permissible activities
- Tighter constraints around cross-border service provision
- In-country registration mandated for licence eligibility
- Addition of “operating a trading platform” to legitimized activities
Oversight authority
- Transfer of regulatory jurisdiction from Ministry of Finance to Financial Supervisor
In light of these policy developments, some crypto ventures are exploring alternate jurisdictions such as Lithuania, which offers a more flexible, cost-efficient regime. Consulting qualified advisors can help assess optimal structuring solutions given a company's strategic priorities.
Lithuania
Since 2020, Lithuania has significantly expanded its regulatory infrastructure around cryptocurrencies, engendering a secure, innovation-friendly environment. The capital, Vilnius, has rapidly developed into a blockchain hub, attracting growing relocation and formation of crypto companies in Lithuania. Key advantages include:
Cost efficiency
- Operational expenses lower than other major European financial centres
- Streamlined licensing timeline — weeks rather than months
Preferential tax treatment
- Array of tax incentives and credits
- 15% flat corporate income tax rate
- Discounted 5% tax rate offered to SMEs meeting designated turnover and employee count thresholds
To apply for a Lithuanian crypto licence, entities must first incorporate as a UAB (PLC) furnishing relevant digital asset services. Minimum capital requirements raised to €125,000. The new legislation also mandates enrolled crypto firms to appoint compliance personnel verifying AML program implementation.
Qualified advisors can provide guidance on navigating Lithuania’s crypto regulatory environment and licensing process.
United Kingdom
As a global financial epicentre encouraging technology-driven innovation, the United Kingdom has taken a receptive stance toward cryptocurrency adoption and blockchain entrepreneurship. While not considered legal tender, cryptocurrencies can be utilized for trading, investments and transactions in the UK. However, as of January 2021, the sale of crypto derivatives and exchange-traded notes to retail consumers were prohibited, aiming to shield less-sophisticated investors from elevated risks.
Registered cryptocurrency companies in the UK must implement comprehensive AML controls, register with the FCA and perform customer due diligence. Firms engaged in crypto-related activities may fall under the regulatory purview of several key UK statutes:
- Financial Services and Markets Act
- Financial Services and Markets Order
- Electronic Money Regulations
- Payment Services Regulations
Seeking to spur responsible innovation, the UK government is formulating a bespoke framework tailored to crypto assets. The Treasury recently completed a consultation on enhancing crypto regulation and industry collaboration through a proposed Future Regime for Digital Assets. Additionally, policymakers are working to formally recognize stablecoins within payments legislation.
Major global exchanges have launched UK operations, alongside countless blockchain startups. With its blend of financial maturity, technological leadership and calculated regulatory evolution, the UK promises to remain an appealing destination for cryptocurrency ventures. Our firm offers specialized advisory services to help international clients successfully establish compliant, well-structured crypto entities in the UK jurisdiction.
Kazakhstan
Boasting proactive crypto adoption policies, Kazakhstan legally recognized Bitcoin in 2020. The Digital Assets Law also took effect, furnishing comprehensive regulations around crypto asset issuance/circulation monitoring.
While decentralized digital currencies face restrictions, the Astana IFC enables compliant issuance and trading. Crypto exchanges apply for licensing from AFSA, Kazakhstan, to conduct authorized transactions. With its 2022 AFSA approval, Binance launched localized offerings.
Permitted activities
Licensed AIFC crypto firms may facilitate exchanges between cryptocurrencies and fiat, accept/transfer crypto payments, and provide other asset services. Enrolled companies undergo customer verification and appoint AML personnel.
Registration/compliance requirements
- Local entity incorporation with bank account
- Minimum capital based on 6-month projected costs
- Physical presence of senior executives
Tax treatment
- As of January 2023, 10% tax levied on crypto sale profits. Mining income incurs a 15% rate, but AIFC registrants enjoy tax exemptions.
Kyrgyzstan
Since passing its 2022 Virtual Assets Law, Kyrgyzstan has also instituted clear frameworks around licensure of crypto companies in Kyrgyzstan eligibility and allowed activities. Private, non-commercial cryptocurrency ownership and trading face no restrictions. Regimes exist for licensing commercial players.
Available licence categories include:
- Crypto Exchanger
- Crypto Exchange
- Mining
The law mandates miner registration, assigned equipment, active wallet access and quality power infrastructure. Electricity consumption incurs 10% tax, easing government revenue management.
Cryptocurrency registration pathways in Canada
A leader in technological innovation, Canada enacted early cryptocurrency legislation in 2014 by amending its Proceeds of Crime Act. This regulatory clarity has enabled balanced oversight, safeguarding investors while encouraging innovation.
The PCA prescribes registration with the FINTRAC and procuring an MSB licence for crypto trading platforms in Canada, classified as money services businesses. Registration must be renewed biennially. Traders recognize crypto income on tax returns, subject to federal/territorial taxation.
As home to numerous digital asset ETFs, Toronto has emerged as a global blockchain hub. Canada's responsive regulatory environment and transparent rules offer an appealing destination for registering compliant cryptocurrency companies.
El Salvador crypto company registration
El Salvador has totally embraced cryptocurrency through its unprecedented 2021 move, designating Bitcoin as legal tender. Consequently, all merchants can accept Bitcoin payments. Still, enhanced compliance prerequisites also apply.
Registration and ongoing requirements
- Registration with the Central Bank within 20 days of commencing operations
- AML, KYC and cybersecurity controls
- Safeguarding and record-keeping around customer assets and transactions
- Tracking liabilities, capital, and assets
Tax treatment
- As legal tender, Bitcoin sales and transactions incur no capital gains tax. Taxation of other cryptocurrencies remains unsettled.
El Salvador also offers a unique Crypto Citizenship by Investment program. Applicants investing $1 million in Bitcoin or Tether gain residency, with a pathway to citizenship.
The country's enthusiastic crypto position will likely propel strategic registration interest from international ventures.
Conclusion
Regulatory posture constitutes a principal driver of cryptocurrency adoption globally. With many governments still developing tailored digital asset policy frameworks, understanding current and emergent compliance obligations across jurisdictions remains imperative when launching a crypto company abroad.
Malta, Switzerland, the United Kingdom, Estonia, Lithuania, Canada, Hong Kong, Kyrgyzstan, the Astana International Finance Centre (AIFC) and El Salvador currently number among the most cryptocurrency-friendly regulatory environments worldwide. Through responsive policies and legislation promoting ethical blockchain innovation, these nations have signalled overarching support for cryptocurrency acceptance and utilization.
Expert legal and tax advisors can offer indispensable guidance when exploring prospective jurisdictions for launching compliant cryptocurrency companies. Factoring regulatory philosophies and specific licence types, capitalization requirements, tax incentives and general business conditions facilitates the identification of an optimal country for a firm's strategic vision and operating model.
Those with outstanding questions relating to multi-jurisdictional cryptocurrency regulations or registration procedures are encouraged to reach out to our team. We would be pleased to offer nuanced jurisdiction-specific input drawing from our specialized experience assisting international clients in structuring exchanges, trading platforms, wallets and broader virtual asset service enterprises around the globe.
