Obtaining a crypto licence in Sri Lanka - YB Case 2024

Obtaining a crypto licence in Sri Lanka

Obtaining a crypto licence in Sri Lanka

Selecting an optimal jurisdiction for cryptocurrency enterprises

The jurisdiction in which a cryptocurrency company registers carries critical implications for its operations and sustainability. Entrepreneurs contemplating a digital asset venture must carefully weigh the regulatory environment, tax liability, legal protections, market access, reputation, transparency, and adaptability to change across different countries and regions.

The regulatory regime under which a cryptocurrency firm is constituted dramatically impacts the ease of conducting business. Jurisdictions with bespoke crypto-friendly legislation and transparent licensing frameworks engender favourable conditions for entrepreneurs. However, strict requisites treating cryptocurrencies akin to securities or financial instruments can prove challenging.
Tax policies pertaining to crypto businesses diverge substantively across jurisdictions. Certain countries promulgate tax exemptions and benefits to incentivize cryptocurrency adoption, considerably reducing entrepreneurial tax exposure. Others impose income tax, capital gains tax, and multilayered tax obligations that can compel businesses to shift bases.
Legal protection
Robust legal systems with specialized courts adjudicating cryptocurrency disputes provide vital safeguards to companies and founders. Jurisdictions with ambiguous or undeveloped crypto legislation pose enhanced legal risks, ranging from criminal liability to difficulties enforcing contracts.
Market access
The country where a firm incorporates influences opportunities to access international markets and clients. Crypto companies may benefit from jurisdictions allowing seamless cross-border operations.
Reputation and transparency
Stringent regulations and legal accountability in a jurisdiction renders companies constituted there more credible according to investors and partners. Moreover, low corruption levels ensure transparency in regulatory compliance, reducing business risks.
With the cryptocurrency industry still in a state of flux, the ideal jurisdiction must exhibit the dynamism to continuously evolve legal frameworks in step with technological innovation.

In light of these parameters, entrepreneurs must holistically evaluate candidate jurisdictions before selecting one that optimizes regulatory latitude, tax efficiency, legal protection, market reach, repute, and future-readiness.

Cryptocurrency in Sri Lanka: addressing legal ambiguity

Sri Lanka faces pressing imperatives to address the legal ambiguity surrounding cryptocurrencies that enables unchecked ecosystem growth devoid of consumer safeguards.

The absence of tailored cryptocurrency regulations in Sri Lanka precipitates uncertainty around permissible activities. With no definitive licencing or compliance prerequisites, companies and individuals lack clarity on legal rights and duties, risking non-compliance. These hamper market participation.

Investor vulnerabilities
The regulatory vacuum compounds vulnerabilities for cryptocurrency investors and users, lacking mandated governmental protections against potential fraud, cybercrime, or losses accruing from technology failures. Addressing this is integral.
Taxation challenges
The opaque regulatory stance also spawns taxation uncertainties that impede law-abiding businesses and retail participants from accounting disclosures. Conflicts between existing tax policies and emerging crypto-transaction models beget compliance difficulties.
Money laundering and terrorism financing risks
Additionally, unregulated environments enable exploitation for money laundering, terrorist financing and other illegal activities. While cryptocurrencies present transformative potential, unchecked ecosystems pose grave national security and reputational hazards.

In cognisance of attendant risks, Sri Lanka urgently requires dedicated legal frameworks, licensing protocols and compliance systems tailored to cryptocurrency businesses. These must foster innovation while prioritising consumer interests by mandating security, reporting, and dispute resolution mechanisms.

The regulatory gaps in Sri Lanka discount optimum cryptocurrency ecosystem growth and adoption. Principles-based legislation balancing stakeholder interests can unlock digital asset opportunities while mitigating risks — the imperative first step. Ongoing engagement between policymakers, industry participants and technologists remains vital to responsibly optimize crypto advancements.

Risk analysis for cryptocurrency ventures in Sri Lanka

The regulatory gaps surrounding cryptocurrencies in Sri Lanka generates manifold risks for entrepreneurs seeking to establish digital asset enterprises. A prudent assessment of attendant perils provides vital insights for risk mitigation.

Fraud risks
Sri Lanka's informational asymmetry on cryptocurrency transactions precipitates a proliferation of fraudulent initial coin offerings, phishing schemes and exit scams that have resulted in major capital losses. Addressing this calls for consumer literacy initiatives alongsid​e alert systems.
Market manipulation risks
The absence of trading oversight renders Sri Lankan cryptocurrency investors vulnerable to market manipulation through practices like front-running orders or wash trading. Creating reporting obligations and surveillance mechanisms can protect market integrity.
Legal and compliance risks
By dint of the legislative void shrouding permissible cryptocurrency activities, participants court unintended criminal liability, defeasible contracts or other compliance exposures. Updated legal frameworks are integral to reinforcing crypto participation security.
Taxation risks
The opaque regulatory stance on crypto tax accounting signposts potential for incorrect tax filings, creating problems for good-faith businesses and investors. Updated taxation policies aligned with cryptocurrency transaction models can mitigate this.

In essence, the nascent state of cryptocurrency adoption in Sri Lanka is besieged by risks spanning illicit activities, financial frauds, legal uncertainty and taxation ambiguity. While the underlying technological promise remains robust, cogent policymaking and literacy building are vital prerequisites to engender trust and security across market participants, thereby unlocking this potential.

Legal liabilities for illicit cryptocurrency ventures in Sri Lanka

While definitive cryptocurrency regulations remain lacking in Sri Lanka, entities engaged in unlawful digital asset activities still risk stringent legal actions under adjacent policy frameworks concerning financial crimes, consumer protection and foreign exchange management.

Administrative liability

Regulatory authorities leverage broad penalty provisions under extant laws to prevent illegal cryptocurrency schemes through:

  • Monetary penalties: entities may confront harsh fines proportionate to the scale of transgressions. These seek to disincentivize misconduct.
  • Asset seizure: offenders risk permanent confiscation of any profits, property, or instruments connected with illegal cryptocurrency dealings as restitution.
Criminal liability

Additionally, acts contravening black-letter laws — like fraud, money laundering or terror financing — qualify for criminal liability entailing:

  • Incarceration: commensurate with offence severity, convicts may receive strict prison sentences and accompanying heavy fines. This upholds penal deterrence.
  • Asset forfeiture: Law enforcement can seek permanent forfeiture of any assets linked to the criminalized conduct to preclude unjust enrichment.

In essence, the legal void around bona fide cryptocurrency activity in Sri Lanka does not exonerate purposeful illicit activity like duping consumers or enabling financial crimes. Stringent multi-agency efforts leverage diverse legal scope to punish such conduct, seeking to reinforce public confidence and trust in the digital asset ecosystem’s credibility.

Let's now look at the jurisdictions that were pioneers in crypto regulation and in 2024 still maintain leadership on the world stage as the most attractive destinations for incorporation of cryptocurrency businesses and obtaining licences for cryptocurrency activities.

Cryptocurrency regulations and licensing in El Salvador

In a global first, El Salvador conferred legal tender status to Bitcoin in 2021, catalysing profound policy dialogues around mainstream cryptocurrency integration. This development signals regulatory commitment to participate in the emergent digital asset ecosystem.

The unprecedented regulatory clarity unlocks myriad commercial opportunities for cryptocurrency ventures in El Salvador, including:

  • Institutional validation: national-level legislation lends institutional credibility to cryptocurrency adoption, encouraging entrepreneurial participation.
  • Infrastructure advancements: recognizing crypto payments spurs critical infrastructure build out — like digital wallets and payment systems — creating prospects across the crypto-economy.
  • Investment destination: the progressive regime positions El Salvador as a viable jurisdiction for global crypto companies and investors seeking favourable business environments.
  • Industry networks: crypto companies can leverage El Salvador’s leadership to forge strategic relationships and anchor operations to access leading North, South, and Central American markets.

Crypto licensing incentives in El Salvador

Registration with appropriate authorities enables crypto companies to benefit from El Salvador’s nascent but growing digital asset market under a balanced regulatory approach:

  1. Compliance: licensing necessitates adherence to nationwide AML/CTF regulations, reinforcing ecosystem integrity.
  2. Tax advantages: El Salvador offers tax exemptions for licensed cryptocurrency service providers to encourage market expansion.
  3. Legal security: local incorporation alongside licensed operations accord legal protections to crypto businesses under evolving commercial codes.

The licensing process

Cryptocurrency licensing in El Salvador entails:

Stage 1

Business Plan submission

Outputs must encompass proposed services, transaction volumes, compliance protocols, and infrastructural capabilities.

Stage 2

Review and evaluation

Authorities assess applicants across matrices spanning security, stability and technical competencies.

Stage 3


Successfully vetted entities receive licences to offer authorized crypto activities in El Salvador’s regulated environment.

Overall, El Salvador’s progressive embrace of cryptocurrencies creates substantial opportunities for global digital asset businesses. Obtaining licensing confers the ability to leverage the country’s expanding crypto infrastructure — under an agile yet balanced compliance regime designed to enable innovation.

Thailand's regulatory framework for digital asset businesses

Thailand has taken proactive steps to develop a comprehensive regulatory framework to govern digital asset and cryptocurrency businesses, fostering an environment conducive to innovation in this sector.

Licensing regime

In 2018, Thailand introduced regulations requiring businesses dealing with cryptocurrencies and digital assets to obtain relevant licences from the Securities and Exchange Commission (SEC). This licensing regime aims to uphold integrity, enhance consumer protection and prevent illicit activities.

To operate legally, entities such as cryptocurrency exchanges and wallet providers must acquire approval from the SEC. This additional oversight bolsters security for platform users. The licensing framework also encompasses companies engaged in digital asset issuance, brokerage or dealing.

By establishing clear expectations and accountability through licensing, Thailand has paved the way for legitimate crypto businesses to thrive.

Government support

Alongside regulation, the government has actively nurtured blockchain and cryptocurrency startups. Thailand recognises the potential of these technologies to drive economic growth and efficiency.

International cooperation

As the crypto industry continues evolving rapidly, Thailand participates in global dialogues to harmonise regulatory approaches. By exchanging insights with international regulators, Thailand seeks to develop appropriate and adaptive policies to govern digital asset activities.

Obtaining a cryptocurrency licence in Thailand: key steps

Thailand has instituted a robust licensing framework for legitimate cryptocurrency businesses. Navigating the application process requires methodical preparation across various areas:

  1. To lay the groundwork, thoroughly review regulations governing cryptocurrency activities in Thailand. Pinpoint the exact licence relevant to your planned digital asset services. Develop a comprehensive business plan articulating your operations, business model, technical architecture, risk management protocols, and AML controls.
  2. Incorporate a company in Thailand in line with local legal requirements. Ensure all necessary permits and documentation for general business operations are in place beforehand.
  3. Submit your completed licence application to the appropriate regulatory body, enclosing accurate supporting documents that depict all aspects of your proposed cryptocurrency business.
  4. The regulator analyses your submission, weighing criteria such as financial resources, security systems, technical infrastructure, AML policies and overall legal compliance.
  5. Upon satisfactory review, the regulator issues formal approval for your firm to offer registered cryptocurrency services legitimately in the Thai market.

Documentation required

The licence application must include details across key operational dimensions:

  • Company registration certificates
  • Business plan covering all digital asset activities
  • Technical security protocols
  • Financial statements demonstrating solvency
  • AML verification methodology
  • Management and personnel summaries
  • Safeguards for client assets and data

Additional documents may be required depending on suggested business activities. Maintain clear communication with regulators to furnish necessary information.

Regulating digital asset businesses in Kyrgyzstan

As interest in cryptocurrencies grows globally, Kyrgyzstan has recognised the need to institute an appropriate regulatory regime to govern digital asset activities.

Entities looking to operate cryptocurrency exchange platforms or provide other crypto-based services in Kyrgyzstan must obtain a licence from the relevant authorities. This licence serves as official validation that the business meets legal standards.

Stringent reporting requirements

The legislative framework mandates extensive reporting procedures for licence holders related to customer due diligence, transaction monitoring and audits. By ensuring transparency, these requirements mitigate potential risks of illicit financial activities.

Safeguarding users

A key focus of the regulation is establishing proper consumer protection guardrails, such as measures to deter fraud and financial crimes involving digital assets. Appropriate oversight enhances the security of cryptocurrency users and fosters trust.

Supporting responsible innovation

Maintaining global modernisation efforts, Kyrgyz policymakers aim to encourage ethical innovation of digital financial products that align with compliance obligations around financial crime.

A major component is formally recognising and regulating bona fide cryptocurrency trading platforms operating in Kyrgyzstan through licensing. This shifts exchanges out of any legal grey areas.

Taxation policies

As the market evolves, the government intends to institute fair, balanced tax policies for crypto-related activities without impeding technological progress. This represents a milestone in legitimising digital asset transactions.

Overall, Kyrgyzstan’s crypto regulations uphold financial transparency and integrity without stifling innovation. By ensuring ethical conduct, crypto businesses can build consumer confidence and help drive economic growth.

Obtaining a cryptocurrency licence in Kyrgyzstan

Navigating Kyrgyzstan's crypto licence application process entails methodical preparation across multiple dimensions:

Stage 1:
Carry out in-depth research into Kyrgyz legislation applicable to cryptocurrencies and blockchain technology. Ensure a complete understanding of regulatory obligations and licensing prerequisites.
Stage 2:
Draft a detailed business plan outlining the company's strategic vision within the Kyrgyz digital asset space. Articulate targets across marketing, customer acquisition, operations, human resources and projections of key financial metrics.
Stage 3:
Collate all documents required for the licence application, including certificates of business registration, personal identification papers for directors/shareholders, statements of capital reserves and audited financial statements.
Stage 4:
Submit the comprehensive licence application to the relevant regulatory authorities, enclosing the necessary particulars of the proposed cryptocurrency venture.
Stage 5:
Pay all applicable licence processing fees to the governing agencies upon request following application receipt.
Stage 6:
Pursue ongoing constructive dialogue with assessing authorities throughout their vetting process. Be responsive to any queries or requirement for supplemental materials. Receive formal licence approval.

Once obtaining licence holder status, ensure continuous adherence to pertinent regulations and reporting standards relevant to cryptocurrency activities. Keep abreast of new policies as the ecosystem evolves.

Successful progression through these steps results in accredited institutional participation in Kyrgyzstan's expanding digital asset space.





Official status of cryptocurrencies

Bitcoin is recognized as legal tender.

Cryptocurrencies are not recognized as legal tender, but are regulated as digital assets.

Cryptocurrencies are not legal tender, but there is a regulatory framework for cryptocurrency activities.


The country has favourable laws for crypto businesses, especially for the use of Bitcoin.

Strict but clearly defined regulations for cryptocurrencies, including licensing of exchangers and ICOs.

Regulation of cryptocurrency activities is under development; New bills are being introduced for legalization and regulation.

Innovation support

The country is actively promoting innovation in the field of cryptocurrencies and blockchain.

Thailand is open to innovation in fintech and crypto technology, but with strict regulation.

Kyrgyzstan strives to create a favourable environment for crypto firms and the development of fintech products.

Protection of investor rights

Investors' rights are protected under general legislation, but specific laws targeting cryptocurrencies may be lacking.

Investors' rights are protected through clear regulations and licensing.

The country is working to strengthen the protection of the rights of investors and users of cryptocurrencies through new legislative initiatives.

Access to banking services

Access to banking services has been made easier for cryptocurrency companies thanks to the official recognition of Bitcoin.

Banking services are available, but there may be restrictions for cryptocurrency companies due to regulatory requirements.

Access to banking services for crypto companies is limited; however, with the development of legislation, the situation may improve.

Development prospects

El Salvador is a pioneer in the legalization of Bitcoin and is attracting the attention of the global crypto community.

Thailand has the potential to become an important hub for cryptocurrencies in Southeast Asia, thanks to its strong financial sector and interest in innovation.

Kyrgyzstan is positioning itself as a country with an emerging cryptocurrency market, attracting attention due to its regulatory initiatives.

The countries outlined display distinct frameworks for governing digital asset enterprises, presenting unique strategic considerations. El Salvador has embraced cryptocurrency within its financial system. Thailand employs methodical oversight to spur ethical crypto innovation. As an emerging frontier, Kyrgyzstan harbours substantial room for market expansion under compliance guidelines.

Our firm’s team boasts specialized expertise across these jurisdictions’ regulatory landscapes. We offer bespoke guidance to help clients comprehensively evaluate and navigate the optimal regime for launching compliant, successful cryptocurrency ventures aligned with their business priorities.

The advisory services provided include:

  1. In-depth intelligence of country-specific crypto regulations policies and trends
  2. Licensing requirement analysis
  3. Risk evaluation
  4. Local partnership facilitation
  5. Ongoing licence application support

We invite you to learn more about how our offering can effectively further your strategic goals by completing our online contact form. Our consultants will develop an individual solution that will be best implemented in your chosen jurisdiction.

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