Crypto License in Ireland
Among those who consider establishing a crypto business within the EU, Ireland is commonly known as one of the most favourable options. It hosts more than 430 financial service providers, including some of the big names in the crypto industry: Coinbase and Gemini. Cryptocurrencies are widely supported on a national scale in Ireland, but this country also offers good conditions for obtaining a cryptocurrency licence, acting as a gateway to crypto trading in the EU.
Outlining the difference between cryptocurrency and traditional currencies, it’s important to note that whereas fiat (or traditional) currencies do exist in a digital form, crypto exists only in digital form. Consequently, cryptocurrencies are also widely known and referred to as virtual assets. The term ‘virtual asset’ refers to any digital representation of value that can be digitally traded, transferred or used for payment or investment purposes. It does not include the digital representation of ffat currencies.
The distinction is also very clear in a regulatory sense, as there are major differences in establishment and licensing terms for companies representing both areas of financial activity.
Ireland crypto license
BENEFITS OF OBTAINING A CRYPTOCURRENCY license IN IRELAND
Stepping hand in hand with technological advancements, Ireland offers a favorable and profitable environment for working with crypto assets, granting good trading opportunities for Bitcoin and other cryptocurrencies in the European Union.
From a regulatory perspective, the procedure for opening a company in Ireland is comparatively quick and straightforward. A very relevant point to add is that the establishment process takes approximately two weeks and can be completed without the personal presence of founders.
That makes for a high success rate and is well illustrated by the presence of many successful global players in the finance industry, who have chosen Ireland as a legal base for their business activity. Having so many financial service providers in one place also creates a unique business environment, maintaining a self-sufficient ecosystem but also drawing significant support and good response at a regulatory level. A good example of that is a recent strategy for the international financial services industry, titled “Ireland for Finance”. In short, it predicts an increase in structural and governmental support to the fintech sector, outlining ambitious growth targets and positioning Ireland and Dublin as the leading Financial Services hub.
Shifting to the financial aspect of opening and running a business in the finance industry, Ireland has an advantageous taxation system, offering a relatively low tax rate of 12,5%. Furthermore, Ireland supports research development and innovation, providing financial support that includes tax credits and funds air by IDA Ireland. Finally, holders of a cryptocurrency license issued in Ireland are also eligible to passport to other EEA member states. In other words, licensed virtual asset service providers may do business in another EEA state without the need for further authorization from that country.
Cryptocurrency license in Ireland: regulatory system and licensed financial services
In Ireland, companies that offer money exchanges between crypto currencies or between crypto and fiat currencies are categorized as Virtual Asset Service Providers (VASPs). In order to carry out trading operations that involve virtual assets, companies need to obtain a cryptocurrency license. For the purposes of the legislation, VASPs that conduct business in Ireland are labeled as “designated persons”. They are subject to the Irish ati-money laundering (AML) network and the countering the financing of terrorism (CFT) network and must abide by the regulations outlined by both networks.
The regulatory body that handles licensing procedures, issues cryptocurrency licenses (or denies applications) and controls licensed financial service providers in Ireland is the Central Bank of Ireland. However, it’s not a license in a traditional sense that it issues, but rather an authorization. Such authorization offers the right to perform the following operations:
- Exchange between virtual assets and fiat currencies
- Financial trades involving one or more types of virtual assets
- Transfer of virtual assets from one address or account to another – on behalf of another person (otherwise referred to as a user or a client of a financial service provider)
- Hosting and servicing storage wallets
- Participation in the provision of financial services related to the issuance and/or sale of virtual assets.
FORMAL REQUIREMENTS FOR OBTAINING A CRYPTOCURRENCY license IN IRELAND
Applicants applying for AML/CFT registration will have to apply to the Central Bank. In order for the Central Bank to approve the VASP application for AML/CFT registration, the Central Bank must verify that:
- The company’s anti-money laundering/counter-financing of terrorism policies and procedures are effective in addressing money laundering and terrorist financing (AML/TF) risks associated with its business model.
- Company management and beneficial owners are suitable and correct.
With regard to the first requirement, SAPs must comply with the AML/CFT obligations contained in Part 4 of the DSS 2010 – 2021. These include:
- Conducting ML/TF risk assessment in their business
- Customer Due Diligence (CDD) for their customers
- Ongoing monitoring of clients and their operations
- Suspicious Transaction Reports (STRs) to the Financial Intelligence Unit (FIU) of Ireland and to the Revenue Commissioner when money laundering or terrorist financing is known or suspected
- Development and implementation of anti-money laundering/terrorist financing policies, procedures and controls
- Retention of relevant documents
- Ongoing anti-money laundering/counter-financing of terrorism training for all staff.
Additional formal requirements apply to senior VASP employees. Although the Central Bank has not expressed any expectations regarding the location of the directors of the applicant companies, the territoriality principle enshrined in the EU anti-money laundering directives and section 25 CJA2010 applies. The Central Bank therefore expects the claimant firm to be physically located in Ireland. In addition, there should be at least one senior executive officer physically based in Ireland to act as a contact person with the Central Bank.
In fulfilling its statutory role, the Central Bank applies a robust, structured and risk-based process to ensure that only applicants who demonstrate that they are able to meet this requirement are registered. The Central Bank will process each application for registration as expeditiously as possible, fulfilling its obligation to act as a strict and effective controller.
Origin and scope of activity requirements
All SAPs established in Ireland must be registered with the Central Bank for anti-money laundering/terrorist financing purposes.
Firms that are not established in Ireland and/or that do not do business as CSSA immediately prior to the entry into force of the 2021 Act must be registered with the Central Bank prior to the provision of any financial services, related to virtual assets from Ireland.
VASP, established in Ireland and operating as a VASP immediately prior to the entry into force of the 2021 Act, has three months to apply to the Central Bank for registration.
If a company that is currently authorized by the Central Bank for prudential and/or business services, or is also planning to conduct business as VASP, this company must register with the Central Bank as VASP.
The Central Bank will process each application for registration as expeditiously as possible, while fulfilling its obligation to ensure the strict and effective discharge of the functions of controller.
The formal process of establishing a financial services company in Ireland
For registration in this jurisdiction, a private limited company is the most suitable option. Choosing this option means that the shareholders’ liability will be limited to the amounts invested.
Establishing a company in Ireland involves completing the approximate steps:
- Determining the types of intended transactions that will be carried out through a crypto company in Ireland
- Selecting and verifying the name of the company
- Determining the legal address of the company
- Collecting and clearly presenting relevant information about the founders, beneficiaries and managers of the company
- Drafting and executing constituent and registration documents
- Preparing for and going through the registration process
- Opening a bank account for settlement transactions
- Passing the authorization procedure carried out by The Central Bank of Ireland in accordance with the type of intended financial transactions.
The specific authorization procedure may vary from the one described above and will be determined on a case-by-case basis.
Setting up for success: steps to complete before before applying for VASP authorization
Prior to submitting a VASP AML/CFT registration form, the applicant should ensure that the following criteria are aligned with regulatory requirements:
- Services that will be offered constitute VASP services as set out in the CJA 2010 to 2021
- The company is fully prepared to comply with its AML/CFT obligations under the CJA 2010 to 2021 without failure and/or disruptions
- The company is satisfied with the obtainable opportunity to conduct a VASP activity as regulated by The Central Bank of Ireland.
Documentation and forms necessary for VASP authorization application
To successfully submit an application for authorization, applicants are obliged to submit the following registration forms:
- Registration form VASP AML/CFT (including specific information and documentation requested in this form).
- Application for each legal entity or other type of legal entity that is the beneficial owner in VASP requesting permission.
- Application for each individual who is the beneficial owner to the Applicant VASP. In addition, the applicant will need to ensure that all relevant persons who are asked to perform functions related to pre-approval monitoring are completed with individual fitness and integrity questionnaires. Individual questionnaires should be submitted electronically through the Central Bank’s MSA system by all persons concerned. Applicants must familiarize themselves with the Central Bank’s 2018 Standards of Fitness and Integrity Guidelines before submitting an individual questionnaire.
THE APPLICATION PROCESS
While the application process for a financial services company may vary depending on the scope and nature of the services the company intends to provide, the application process for a VASP permit (cryptocurrency license) is quite simple. It contains the following steps:
- The applicant shall provide the Central Bank with the VASP form for pre-registration.
- The Central Bank sends the applicant an e-mail containing the institution number, reporting date and details on how to access and submit the VASP AML/CFT registration form through the Online Reporting System of the Central Bank (ONR’).
- The applicant submits the VASP AML/CFT registration form and all supporting documentation through the ONR system.
- The Central Bank confirms receipt of the application for registration of VASP by e-mail to the applicant Company.
- The Central Bank evaluates whether the application for VASP registration contains all the necessary information and documentation for the transition to the evaluation stage, and notifies the applicant firm by e-mail.
- If all necessary information and documentation is provided, the Central Bank evaluates the application for registration. If necessary, the Central Bank requests additional information and/or clarifications from the applicant.
- The applicant shall have the opportunity to respond to the request of the Central Bank for additional information and/or clarification.
- The Central Bank evaluates the additional information provided by the applicant and notifies the applicant of its assessment and subsequent steps. The applicant may be given an additional opportunity to address issues arising at this stage of the process (if any).
- The Central Bank shall notify the applicant of its decision to either grant or refuse registration.
Appointing individuals to senior positions
The Fitness and Probity Regime, which forms a part of the application for VASP authorization (cryptocurrency license), applies to persons in senior positions. For legislation purposes, they are referred to as Controlled Functions (CFs) and Pre-Approval Controlled Functions (PCFs) within regulated financial service providers (RFSPs).
PCFs are a subset of CFs and a prior approval of the Central Bank is required before an individual can be appointed to a PCF role. A person performing a CF must have a level of fitness and probity that is expected for appropriate performance within that particular function.
In relation to Fitness and Probity, the Central Bank’s Guidance on Fitness and Probity Standards 2018 do not limit Control Functions (CFs) to functions performed in the State. Accordingly, a person performing a CF at a location outside of the State on behalf of a regulated financial service provider authorised, licensed or registered in the State, will be subject to Part 3 of the Central Bank Reform Act 2010.
A firm must not permit a person to perform a CF, unless:
- The firm is satisfied on reasonable grounds that the person complies with the Central Bank’s fitness and probity standards
- The person has agreed to abide by the Central Bank’s fitness and probity standards.
In any case, all managers and beneficiaries of an authorized VASP must have an impeccable reputation.
AUDITS AND REGULATORY ENFORCEMENT
The Central Bank implements a graduated approach to AML/CFT supervision. This means that higher intensity and intrusive supervisory measures (e.g., onsite inspections and review meetings) are used to monitor firms that present a higher risk of ML/TF. Other less intensive supervisory measures such as AML/CFT Risk Evaluation Questionnaires and outreach activities (e.g., presentations and seminars) are also used as part of the Central Bank’s AML/CFT supervisory programme.
CRYPTOCURRENCY TAX SCHEME IN IRELAND
Whereas companies are entitled to prepare their accounts in a currency other than euro, they are not entitled to do so in crypto. This regulation also involves VASPs authorized by The Central Bank or Ireland who, for tax purposes, must prepare their accounts for tax purposes in euro or another functional currency.
Regarding crypto taxes that apply to natural persons, tax payers’ income related to crypto trading is subject to capital gains tax at a rate of 33% on gains. Losses, on the other hand, can be used to offset capital gains tax. For corporate entities, chargeable gains will be subject to a 12,5% tax rate.
Regarding VAT taxation, bitcoin and other crypto currencies are deemed to be “negotiable instruments”. Therefore, cryptocurrencies are exempt from VAT. This means that those engaged in exchanging cryptocurrencies won’t be subject to VAT.
In cases where employees are paid in bitcoin, the amount must be converted to euro at the time of the payment so that income tax can be calculated. The territoriality aspect of cryptocurrencies is still a developing area according to the Irish tax system. In the case of an Irish resident, they will usually be liable to tax in Ireland on their worldwide income and gains related to cryptocurrency trading operations. A non-resident person will generally only be subject to tax on Irish-sourced income or gains, or profits of an Irish trade. Read more about Ireland crypto tax.
Our company is a team of experts who will help you open a company and obtain a cryptocurrency license in Ireland. We provide legal guidance and ensure strong preparation for business and licensing applications, working hand in hand with our clients to help them navigate the administrative side of their business with confidence.
COST OF CRYPTOCURRENCY LICENSE
PACKAGE «COMPANY & CRYPTO LICENSE IN IRELAND»
|65, 000 EUR|
- Preparation of business plan, company management structure and other financial documents
- Company formation in Ireland
- Submission of registration forms to the CBI
- Application for authorization with the CBI
- Communication with regulatory authority during the application phase
- Legal documents – AML, KYC, IT/Security policies, etc.
- Appointment of the necessary staff
- Bank account opening
At the moment, the main services of our company are legal and compliance solutions for FinTech projects. Our offices are located in Tallinn, Vilnius, and Warsaw. The legal team can assist with legal analysis, project structuring, and legal regulation.