Crypto Regulations 2024

While some jurisdictions remain hostile to the world-changing blockchain technology, others are much more welcoming. They recognize various crypto activities as a separate industry, which gradually leads to the creation of transparent and efficient regulatory frameworks. These crypto regulations pave the way for a clear taxation system and growth-focused developmental support.

Although European countries are at different stages in the construction of comprehensive cryptocurrency regulation, most of them share one fundamental aspect in common. They are intensifying supervision over crypto activities for the purposes of anti-money laundering and counter-terrorist financing. Needless to say, it’s a critical step to build trust in this vastly dynamic industry.

Crypto regulations in different countries

Best European jurisdiction to start crypto to fiat exchange business

Opening a cryptocurrency-to-fiat money exchange company in Europe requires a thoughtful approach to choosing a jurisdiction, taking into account regulatory, tax and operational aspects. Among the many European countries, Lithuania and the Czech Republic stand out as the most preferred places to launch such a business due to their favourable business environment and progressive attitude towards digital assets. In this article, we will take a detailed look at the process of setting up a cryptocurrency to fiat exchange company in Lithuania and the Czech Republic using business language.

Choice of Jurisdiction: Lithuania and Czech Republic

Lithuania and the Czech Republic offer unique advantages for cryptocurrency companies, including clear regulation, access to qualified professionals and attractive tax policies. The choice between these countries will depend on your specific business objectives and regulatory environment preferences.

Step 1: Preparation and Planning

Before you start the registration process, you need to carefully plan your business model, identify your potential target audience and develop a strategy for dealing with regulators. It is recommended to seek advice from local legal and financial experts at this stage.

Step 2: Company Registration

The company incorporation process in Lithuania and the Czech Republic includes the filing of incorporation documents, registration in the commercial register and appointment of managers. The requirements for founders may vary, but usually include AML/KYC compliance checks and proof of financial reliability.

Step 3: Obtaining a Licence

In order to carry out cryptocurrency to fiat money exchange activities, a company needs to obtain the appropriate licence. In Lithuania, this process involves applying to the Lithuanian Bank for a crypto platform operator’s licence, while in the Czech Republic it may be necessary to register as a payment agent or obtain a specialised licence, depending on the exact nature of the services offered.

Step 4: Develop Policies and Procedures

A company must develop and implement internal policies and procedures to comply with regulatory requirements, including AML/KYC, data protection and security of client funds. This requires the establishment of detailed systems and controls.

Step 5: Launching Operations

Once all necessary permits and licences have been obtained, the company can start providing cryptocurrency exchange services. It is important to continue monitoring operational compliance with regulatory requirements and adapt to changes in legislation.

Timing

The timeframe for establishing such a company and obtaining a licence can vary, but the process usually takes from a few months to six months, depending on the complexity of the preparation and review of documents.

Guarantees for Buyers

To ensure trust and protect the interests of customers, a company should provide full transparency of its activities, including the use of funds, terms of service and measures to protect customers’ personal data and assets.

Conclusion

Lithuania and the Czech Republic are attractive jurisdictions to launch a cryptocurrency to fiat money exchange business due to their favourable regulatory climate and support for innovation. Establishing and launching such a company requires careful planning, regulatory compliance and constant monitoring of legislative changes to ensure successful and sustainable operations.

Crypto regulation in Estonia

Estonia’s efforts to build a robust crypto regulation framework are clearly reflected in the Money Laundering and Terrorist Financing Prevention Act (Estonian AML Act). This piece of legislation is now aligned with the Updated Guidance for a Risk-Based Approach to Virtual Assets and Virtual Asset Service Providers, published by the Financial Action Task Force (FATF).

The regulations apply to the companies engaged in such activities as:

• Virtual currency exchange
• Crypto wallet services
• Brokerage services
• Virtual currency transfer services
• Issuance of virtual currencies
• Services of delegating transactions to third parties

Estonia’s Financial Intelligence Unit (FIU) is responsible for enforcing cryptocurrency regulation, including the issuance of crypto licenses. Applicants must pay a state fee of 10,000 EUR and be prepared to wait for up to 12 weeks to receive a license. A state fee of 4,000 EUR is applied to license updates caused by a change in crypto activities.

Key requirements for the applicants:

• Internal risk management policies that comply with AML regulations are crucial, especially when considering the evolving landscape of crypto regulation in Europe. These policies cover aspects like customer profiles, jurisdictions, products, and communication. They also require the appointment of an internal AML auditor responsible for inspecting AML-related procedures, documentation, senior management’s decisions, and employee competences.
• Processes for KYC and the Travel Rule
• Effective and secure IT infrastructure for the provision of the authorised services, including customer data management
• A two-year business plan, including business continuity plan, organisational structure and financial projection
• Senior managers, board members and investors must be fit and proper (have appropriate education and experience as well as prove the absence of convictions for a criminal offence)
• A fully operational office in Estonia where local staff (including AML compliance officer and a competent board member) is employed
• Transparency in the source of funding
• Crypto wallet, exchange, ICO and similar service providers must have a share capital of 100,000 EUR, whereas virtual currency transfer service providers must possess a share capital of 250,000 EUR
• Fulfil own funds requirements which vary depending on the type of crypto services
• Transparent documentation about the shareholders and the number of shares

There’s no particular crypto taxation framework in Estonia. Crypto companies are currently taxed in the same way as other businesses. The standard Corporate Income Tax rate is 20% but it’s not levied on retained and reinvested corporate profits which might be beneficial to growth-oriented crypto companies.

It’s mandatory to conduct an audit if at least two of the following apply:

• Sales revenue exceeds 4,000,000 EUR
• Total assets are valued more than 2,000,000 EUR
• Average number of employees is at least 50

Auditing is also mandatory when at least one of the following conditions is applicable:

• Sales revenue exceeds 12,000,000 EUR
• Total assets are valued more than 6,000,000 EUR
• Average number of employees is at least 180

Crypto regulation in Lithuania

Lithuania’s rapidly evolving cryptocurrency ecosystem has benefited greatly from the country’s favorable cryptocurrency regulation. Currently, it’s considered the most advantageous jurisdiction in Europe for running a cryptocurrency-related business. Local authorities are in tune with the dynamic nature of the industry. Because of this, they are prepared to guarantee efficiency, clarity, reliability, and support to entrepreneurs who are looking to start a crypto project. Best of all, you can achieve this without grappling with extensive bureaucracy, unrefined procedures, and high costs.

The main legislation regulating crypto activities in Lithuania is the Law of the Republic of Lithuania on the Prevention of Money Laundering and Terrorist Financing, the amendment of which includes virtual currencies exchange operators and deposit virtual currencies wallet operators.

Virtual currencies exchange operator – a company established in Lithuania or a branch of a company of an EU country or a foreign state established in Lithuania providing virtual currency exchange, purchase and/or sale services for a fee.

Deposit virtual currencies wallet operator – a company established in Lithuania or a branch of a company of an EU country or a foreign state established in Lithuania providing services of management of deposit virtual currency wallets.

Cryptocurrency businesses are supervised by the Bank of Lithuania who’s also responsible for the issuance of crypto currency licences. Furthermore, the authority strives to accelerate the development of the crypto industry through the blockchain-based sandbox “LBChain” which provides regulatory and technological infrastructure and therefore enables testing of new business solutions in a controlled environment.

Crypto licensees are obligated to report to the Lithuanian Financial Crime Investigation Service (FCIS) for the purposes of meeting AML/CFT requirements. Thanks to the reliable performance of the FCIS, Lithuania is ranked 9th among the lowest risk jurisdictions which is an indication of a safe business environment.

Lithuania offers two types of crypto licences:

• Crypto Wallet Exchange Licence, enabling licensees to manage crypto wallets possessed by their customers
• Crypto Exchange Licence, enabling licensees to provide cryptocurrency-to-fiat-currency exchange services and vice versa as well as cryptocurrency-to-cryptocurrency exchange services

Applications for a cryptocurrency license in Lithuania are managed by the Bank of Lithuania, a testament to the country’s streamlined crypto regulation framework. One of the major advantages here is the quick turnaround time; it takes less than a month to process a crypto application, and it’s completely free of charge. Even better, there are no annual supervision fees.

Starting the process involves establishing a Limited Liability Company (UAB) in Lithuania, which can be done electronically. The minimum share capital for this is 2,500 EUR. Good news is, the company’s owners and directors don’t have to be permanent residents of Lithuania, and there’s no prerequisite for the employment of local staff.

Applicants and licensees must adhere to the following legal requirements:

• Create effective customer identification procedures
• Design and implement AML/CFT policies and workflows, overseen by an AML compliance officer who’s obligated to provide reports to the FCIS

There’s no crypto-specific tax in Lithuania. However, licensed crypto businesses are subject to paying such regular taxes as Corporate Income Tax (15%). They also have the right to access existing tax incentives.

Limited Liability Companies are obligated to carry out audit when at least two indicators exceed the following values on the last day of the financial year:

• The value of the assets shown in the balance sheet – 1,800,000 EUR
• Net sales revenue for the financial year – 3,500,000 EUR
• The average annual number of employees during the reporting financial year – 50

Crypto regulation in Poland

After the introduction of new crypto regulations in 2021, Poland is gradually becoming one the most crypto-friendly countries in Europe. Cryptocurrency businesses are now regulated by the Tax Administration Chamber who administers the Register of Virtual Currencies. They can also expect support from such organisations as The Blockchain and New Technologies Chamber of Commerce and The Innovation Hub.

The latest framework affecting crypto regulation in Poland is the amendment to the Anti-Money Laundering and Counter Terrorism Financing Act of 1 March 2018, also known as the New AML Act. This came into force on the 1st of November 2021. It clearly defines virtual currencies and lays out registration rules for crypto businesses, aiming to achieve effective AML/CFT regulation.

Under the new law, companies engaging in the following activities are obligated to get into the Register:

• Exchange of virtual currencies for fiat money
• Exchange of virtual currencies one for another
• Provision and maintenance of crypto wallets
• Cryptocurrency brokerage

Applications for the Register are to be submitted electronically via the Electronic Platform of Public Administration Services (ePUAP). The processing starts after the receipt of the stamp duty (616 PLN or approx. 133 EUR) which must be paid to the bank account of the Katowice City Hall. If the applicant is capable of meeting all the conditions, the Tax Administration Chamber will enter the company into the Register of Virtual Currencies within 14 days from the date of receipt of the application. It’s quite advantageous that the regulator hasn’t set out any periodic fees for the supervision of the registrants.

Successfully registered businesses will have to prove continuous AML/CFT compliance by submitting AML reports to the General Inspector of Financial Information.

When it comes to crypto regulation in Poland, tax obligations are a key focus. Depending on the legal structure, every Polish crypto company is subject to paying regular taxes, such as Corporate Income Tax (19%), VAT (23%), and Dividends Withholding Tax (19%). These companies may also qualify for existing tax incentives. For example, if a company’s annual revenue doesn’t exceed 2 million EUR, the Corporate Income Tax drops to 9%.

As for auditing and reporting, the rules align with those imposed on other types of businesses. An audit becomes mandatory for a Limited Liability Company if it meets at least two of the following criteria: 1) annual net revenue exceeds 5 million EUR, 2) annual turnover crosses the 2.5 million EUR mark, or 3) the company employs 50 or more full-time staff members annually.

Crypto regulation in Malta

Malta was set to become a thriving blockchain island when several years ago a crypto-specific regulatory framework was introduced by its innovation-oriented government. The industry is supervised by the Malta Financial Services Authority (MFSA).

The regulation framework consists of  the following legislation:

• The Malta Digital Innovation Authority Act (the MDIA Act) which defines the formation of the Malta Digital Innovation Authority (MDIA) whose core responsibility is to promote the development of technological innovation
• The Innovative Technology Arrangements and Services Act (the ITAS Act) which lays out principles for the registration and behaviour of innovative technology service providers
• The Prevention of Money Laundering Act and the Prevention of Money Laundering and Funding of Terrorism Regulations specify AML/CFT related requirements which are enforced by the Financial Intelligence Analysis Unit (FIAU)
• The Virtual Financial Assets Act (the VFA Act) which specifically focuses on crypto assets – classification, licencing and operational principles; it distinguishes three types of authorisations – registration of VFA agents who mediate between the authorities and VFA service providers, registration of whitepapers and applications of VFA service providers

If a crypto company is convinced that it’s capable of complying with all the relevant legislation, it can either register a whitepaper or apply for a licence through a registered VFA agent. The application process usually takes 3-6 months.

Depending on VFA business classification, application fees vary from 3,000 EUR to 12,000 EUR. Furthermore, successful registrants are obligated to pay annual fees that range from 2,750 EUR to 25,000 EUR.

Moreover, licensed businesses must pay applicable taxes, administered by the Commissioner for Revenue (CFR) who’s issued VFA-specific guidelines determining the application of the Income Tax, Stamp Duty and VAT rates to the transactions or arrangements involving Distributed Ledger Technology (DLT) assets.

Generally, VFA service providers are obligated to prepare annual audited financial statements which are also required for the purpose of the preparation of the annual income tax return form. Audit exemption may apply to new crypto businesses that meet the criteria of annual turnover (no more than 80,000 EUR) and of qualifying shareholders (educational studies completed at least at MQF Level 3).

Crypto regulation in Switzerland

Without a doubt, Switzerland is one of the most crypto-welcoming countries due to its dedication to adopt blockchain-based products and services as well as create a friendly regulatory environment. Ethereum is one of the crypto giants currently benefiting from the Swiss hospitality which indicates that this jurisdiction is valued by the industry leaders.

The Swiss crypto industry is supervised by the Swiss Financial Market Supervisory Authority (FINMA) whose goal is to ensure compliance with the AML regulations and licensing requirements.

Cryptocurrency tokens are divided into the following categories:

• Payment tokens – a means of payment that can be used for money or value transfer
• Utility tokens – provision of digital access to an application or service
• Asset tokens – functionally similar to stocks and bonds which makes them subject to securities regulations

One of the key pieces of legislation regulating crypto activities in Switzerland is the Federal Act on the Adaptation of Federal Law to Developments in Distributed Ledger Technology (the DLT Act). It provides a legal basis for the trading of rights through electronic registers, sets rules for the separation of crypto  assets in case of bankruptcy and adds a new licence category for the DLT trading systems.

AML obligations are laid out in the following AML legislation:

• Anti-Money Laundering Act
• Anti-Money Laundering Ordinance
• FINMA Anti-Money Laundering Ordinance

Cryptocurrency companies planning to start operating in Switzerland must obtain a Fintech licence which allows them to accept public deposits of up to 100 mill. CHF (approx. 96 mill. EUR) or crypto-based assets which can’t be invested and no interest can be paid on them.

Key requirements for the applicants:

• Legal structure – a Company Limited by Shares, a Corporation with Unlimited Partners or a Limited Liability Company
• A business plan and a detailed review of company’s activities
• A registered office in Switzerland, where its business activities are carried out
• Minimum share capital – 300,000 CHF (approx. 289,000 EUR)
• Internal AML/KYC/CFT procedures
• A regulatory auditor recognised by FINMA

The application fees start from 1,750 EUR and the duration of the application process can take several months as it heavily depends on the complexity of the project and the quality of the application. Successful applicants are also subject to paying an annual supervisory fee of at least ​​3,500 EUR.

The development of the cryptocurrency industry is promoted by the Crypto Valley Association, the aim of which is to build the world’s leading blockchain and crypto ecosystem through the facilitation of collaboration between the market participants and authorities.

Each canton has different tax treatments which means that tax rates and rules vary depending on the location of a cryptocurrency company and the purpose of the cryptocurrency use. In Zug, the epicentre of cryptocurrency businesses and the birthplace of Ethereum, where taxes can be paid in cryptocurrency, Corporate Income Tax is proportional and can reach 15.1%. Furthermore, all cryptocurrencies must be declared as so-called other funds and are subject to the Wealth Tax (up to 3%). Salaries paid in cryptocurrency are subject to the Income Tax (approx. 23%) which must be reflected in the salary statement.

Crypto regulation in Gibraltar

Gibraltar was the first jurisdiction in the world to start regulating blockchain-based businesses through the Distributed Ledger Technology Framework (the DLT Framework) and is currently striving to enhance crypto market integrity and promote adoption of crypto products and services by introducing new legislation.

One of the main pieces of legislation regulating DLT activities in Gibraltar is the Financial Services Law which is now supplemented with the 10th Regulatory Principle, requiring that all DLT providers operate in a way that maintains and enhances market integrity. The aim is to combat market manipulation and insider trading.

AML regulations remain aligned with the EU’s 5th and 6th AML Directives which means DLT businesses must meet such requirements as implementation of internal policies mitigating risks related to customers, countries of operation, designing systems enabling collection of relevant data, KYC procedures as well as proven competence of the senior management.

The following activities are regulated in Gibraltar:

• Exchange between virtual assets and fiat money
• Exchange between virtual assets
• Transfer of virtual assets
• Administration of virtual assets or instruments allowing control of virtual assets
• Participation in and provision of financial services related to an issuer’s offer and/or sale of a virtual asset

The Gibraltar Financial Services Commission (GFSC) supervises the rapidly developing industry by overseeing compliance with the AML legislation and by being responsible for the issuance of DLT providers licences.

Stages of the application process:

• Pre-application engagement (the GFSC provides guidelines on a specified application proposal and the business model as well as confirms if it falls within the scope of the DLT framework)
• Initial application assessment (submission of the application via the Cloud, enabling the GFSC to assess risks and complexity of the business) which can take up to 2 weeks
  • A non-refundable initial application assessment fee of 2,000 GBP (approx. 2,347 EUR) is paid to the authority
• Full application and presentation (applicants are invited to deliver a presentation to the GFSC which must include information about the competence of the founders (directors), business plan, financial projections and evidence of compliance with the applicable regulations)

To accelerate the development of the blockchain and crypto industry, the government partnered with the University of Gibraltar and several leading crypto businesses to launch the New Technologies in Education (NTiE) group whose role is to offer technology-related education. This approach enriches the market with the workforce possessing the skills necessary for the formidable growth of innovative businesses.

One of the biggest advantages of having a DLT company in Gibraltar is relatively low tax rates. The standard Corporate Income Tax rate is 12.5%. However, it’s worth noting that any foreign income sourced from the activities that aren’t covered by the DLT licence, is also subject to taxation.

Crypto regulation in Cyprus

Cyprus is one of the most attractive jurisdictions for cryptocurrency businesses due to the government’s friendly approach towards the industry and because of the relatively low corporate taxation. For instance, Cypriot businesses are required to pay Corporate Income Tax at the rate of 12.5% which is among the lowest rates in the EU.

Cypriot cryptocurrency businesses are supervised by the he Cyprus Securities and Exchange Commission (CySEC) under the Prevention and Suppression of Money Laundering and Terrorist Financing Law of 2007 (the AML/CFT Law) which also determines activities of crypto asset service providers (CASPs).

CASPs engage in the following activities:

• Exchange between crypto assets and fiat currencies
• Exchange between crypto assets
• Management, transfer, holding and/or safekeeping, including custody, of crypto assets or cryptographic keys or means which allow the exercise of control on crypto assets
• Offering and/or sale of crypto assets, including the initial offering
• Participation and/or provision of financial services in relation to the distribution, offer and/or sale of crypto assets, including initial offering

Key legal obligations that CASPs are subject to:

• A company incorporated in Cyprus with an appropriate minimum share capital as well as fully operational office and local staff
• Designing internal policies for customer identification and for the tracking of sources of funds
• Monitoring clients’ crypto asset transactions and wallet addresses and reporting suspicious activities
• Creating effective workflows and systems for secure data management

Companies planning to start crypto activities in Cyprus must comply with the AML/CFT Law and register with the CySEC as CASPs by submitting an application form. Normally the applications are processed within 6 months.

The directive on the Register of Providers of Services Regarding Crypto Assets (the CySEC Directive) regulates the creation, maintenance, operations and changes of the CASPs Register.

A type of crypto  licence is determined by the following classification:

• Class 1 (initial capital – 50,000 EUR) – CASPs providing investment advice
• Class 2 (initial capital – 125,00 EUR) – CASPs providing the service referred to in Class 1 and/or any of the following services:
  • Reception and transmission of client orders
  • Execution of orders on behalf of clients
  • Exchange between crypto assets and fiat currency
  • Exchange between crypto assets
  • Participation and/or provision of financial services related to the distribution, offering and/or sale of crypto
  • Assets, including the initial offering
  • Placement of crypto assets without firm commitment
  • Portfolio management
• Class 3 (initial capital – 150,000 EUR) – CASPs that provide any of the services referred to in Class 1 or 2 and/or:
  • Administration, transfer of ownership, transfer of site, holding, and/or safekeeping, including custody, of crypto assets or cryptographic keys or means enabling control over crypto assets
  • Underwriting and/or placement of crypto assets with firm commitment
  • Operation of a multilateral system, which brings together multiple third-party buying and selling interests in crypto assets in a way that results in a transaction

The development of Cypriot cryptocurrency businesses is supported by the Innovation Hub, the function of which is to provide guidance on regulations and ensure a continuous dialogue between the local authorities and market participants.

Crypto regulation in UK

Currently a comprehensive crypto regulatory framework is in the making as the UK has recently announced new plans aimed at the safe adoption of the cryptocurrency industry. New regulations are to be introduced this year for the purpose of reducing economic crime. It’s also supposed to reduce bureaucracy and introduce a new competitive taxation system which crypto businesses will be given a chance to benefit from.

In the meantime, businesses intending to start a crypto project in the UK should take note of the AML/CFT requirements adopted from the EU’s 5th Anti-Money Laundering Directive (5AMLD) and the 6th Anti-Money Laundering Directive (6AMLD).

Cryptocurrency businesses planning to operate in or form the UK must meet the following criteria:

• Assess money laundering and terrorist financing risks which their company might be exposed to and implement appropriate internal procedures which must be overseen by competent AML/CFT compliance officers and implemented by trained staff
• Ensure data protection and maintenance of sufficient records for AML/CFT reporting
• Comply with KYC requirements by implementing required policies
• Monitor and report suspicious transactions
• Identify politically exposed persons

Companies that meet the above criteria are able to register with the Financial Conduct Authority (FCA) by submitting an application form via Connect in order to obtain Part 4A Permission authorisation which permits them to operate in the UK. The FCA is responsible for their authorisation and supervision for the purposes of consumer protection, market integrity and fair competition. Applications, depending on their completeness, are normally assessed within 6-12 months.

One of the key aspects to note is application fees. If the applicant’s income is less than 250,000 GBP (approx. 294,000 EUR), a fee of 2,000 GBP (approx. 2350 EUR) applies. If the applicant’s income exceeds this threshold, a fee of 10,000 GBP (approx. 12,000 EUR) must be settled.

Currently cryptocurrency companies pay the same taxes (such as Corporation Tax at the rate of 19%) and are subject to the same reporting requirements as businesses of other industries.

Crypto regulation in Ireland

Ireland is one of the most desirable jurisdictions for running a cryptocurrency business due to such advantages as low tax rates and tax incentives, but when it comes to crypto legislation, a comprehensive framework is yet to be developed.

The Central Bank of Ireland supervises crypto businesses under the Criminal Justice (Money Laundering and Terrorist Financing) (Amendment) Act 2021 which was implemented to harmonise local legislation with the EU’s Fifth Anti-Money Laundering Directive (5AMLD).

To ensure compliance with the AML/CFT legislation, the Central Bank of Ireland maintains the Registry of Virtual Asset Service Providers (VASPs).

VASPs are companies that supply the following services:

• Exchange between virtual assets and fiat money
• Exchange between one or more types of virtual assets
• Transfer of virtual assets (conduct of a transaction on behalf of another person that moves a virtual asset from one virtual asset address or account to another)
• Provision of custodian wallets
• Participation in, and provision of, financial services related to an issuer’s offer or sale of a virtual asset or both

Businesses planning to operate as VASPs in or from Ireland are required to submit a VASP pre-registration form to the Central Bank of Ireland. Currently there are no application or supervision fees. The length of the application process varies based on the number of pending applications and the applicant’s ability to submit a quality application along with all the mandatory documentation.

Detailed instructions on how to submit the application forms and supporting documentation via the Online Reporting System (ONR) are laid out in the guide created by the Central Bank of Ireland.

New and existing crypto businesses can expect support from the Blockchain Ireland, an industry innovation network whose functions include sharing information, organising industry events and promoting success stories. Its core goal is to establish Ireland as a knowledge hub for cryptoasset businesses.

There’s no crypto-specific tax in Ireland, however VASPs are obligated to pay regular taxes, such as relatively low Corporation Tax (12.15%) and Capital Gains Tax (33%).

Lastly, it’s worth noting that one of the most attractive aspects of the Irish taxation system is a three-year exemption from the Corporation Tax which for new startups can be reduced to 0% if their Corporation Tax due is 40,000 EUR or less in a single tax year.

Crypto regulations in EU 2024

In 2024, cryptocurrency regulation in the European Union (EU) continues to evolve, reflecting the institutions’ desire to ensure transaction security, investor protection and market transparency, as well as the prevention of money laundering and terrorist financing. EU regulatory requirements aim to create a harmonised approach to the management and supervision of cryptocurrency-related activities, which is of significant interest to cryptocurrency company founders. This article discusses the step-by-step process of establishing a cryptocurrency company in the EU, the requirements for founders and the timeline for establishing such an organisation in 2024.

Step 1: Analyse the regulatory environment

The first step for a founder is to deeply analyse the regulatory environment in the EU, including the latest changes and trends in cryptocurrency legislation. It is important to familiarise yourself with Markets in Crypto Assets (MiCA), the EU regulatory package aimed at regulating cryptoasset markets, which sets standards for licensing, operations, transparency, and investor protection.

Step 2: Preparing the business plan and documentation

The next step is to prepare a detailed business plan, which should include a revenue model, market analysis, risk management strategy, and AML (Anti-Money Laundering) and KYC (Know Your Customer) policies. The preparation of a complete documentation package is a key element in demonstrating compliance with EU regulatory requirements.

Step 3: Registering and obtaining licences

Launching a cryptocurrency company in the EU requires obtaining the relevant licences, which involves liaising with the national regulators of EU member states. The registration process involves submitting an application and all necessary documentation, and may also require proof of sufficient capital and professional indemnity insurance.

Step 4: Compliance with AML and KYC requirements

Founders should develop and implement effective systems and procedures to ensure compliance with AML/CFT requirements and to fulfil customer identification and verification obligations. This includes appointing an AML/CFT compliance officer and conducting regular internal reviews.

Requirements for founders

Founders must meet a number of requirements, including:

• Proof of impeccable business and personal reputation.
• Having a sufficient level of start-up capital.
• Knowledge and experience in cryptocurrencies and finance.
• Ability to ensure compliance with all regulatory and operational requirements.

Timing of company incorporation

The timeframe for establishing a cryptocurrency company in the EU can vary depending on a variety of factors, including the complexity of obtaining licences, the efficiency of preparing and submitting documents, and the speed at which applications are reviewed by regulators. On average, the process can take anywhere from a few months to a year.

Conclusion

Cryptocurrency regulation in the EU is a complex and dynamic area that requires founders to be attentive to detail and strictly compliant with regulations. Successfully establishing a cryptocurrency company in the EU in 2024 requires in-depth knowledge of the regulatory environment, thorough preparation and the ability to adapt to the ever-changing market conditions.

EU crypto regulations

In the context of the globalisation of financial markets and the rapid development of digital technologies, the issue of regulation of cryptocurrency assets is of particular relevance. The European Union, being one of the leading economic blocs, is actively working on creating a legal framework for the regulation of cryptocurrencies in an effort to ensure the security of transactions, consumer protection and prevention of financial crime. This article highlights the key aspects and current directions of cryptocurrency regulation in the EU, emphasising their importance for businesses and investors.

The EU’s general approach to cryptocurrency regulation

The European Union adheres to the principle of technological neutrality, which means that legislation should not discriminate against any technology, including blockchain. At the same time, the EU seeks to ensure that cryptocurrency assets are not used for money laundering, terrorist financing or other illegal activities. To achieve these goals, the EU is introducing regulatory measures aimed at increasing transparency of transactions and strengthening control over the activities of cryptocurrency market operators.

Major regulatory initiatives

One of the key documents shaping the EU’s approach to regulating cryptocurrencies is the Fifth Anti-Money Laundering Directive (AML5), which for the first time imposes requirements on operators of virtual currency exchanges and cryptocurrency wallets. AML5 requires these operators to obtain licences and conduct customer identification.

In addition to AML5, the EU is working to develop Markets in Crypto Assets (MiCA), a regulation that aims to create a single legal framework for cryptoassets in the EU. MiCA aims to ensure investor protection, market integrity, and support innovation and stability of the financial system.

Challenges and opportunities for business

Cryptocurrency regulation in the EU presents both challenges and opportunities for businesses. On the one hand, the introduction of strict regulatory requirements requires companies to adapt their operating procedures, which may entail additional costs. On the other hand, transparent and predictable regulation creates favourable conditions for attracting investment, developing innovation and expanding the market.

Conclusion

Cryptocurrency regulation in the European Union reflects a desire to combine support for innovation with financial stability and consumer protection. Understanding and complying with regulatory requirements are key success factors for cryptocurrency companies operating in the EU. In an ever-changing regulatory landscape, businesses must be prepared to adapt and capitalise on new opportunities presented by legislation.

 Crypto tax regulations

With the rapid development of the cryptocurrency market and its integration into the global economy, the issues of tax regulation of cryptocurrency assets are becoming increasingly relevant for states, businesses and individual investors. Tax regulation in this area is aimed at ensuring fair and efficient taxation, as well as preventing tax evasion. This article examines the key points and international trends in the tax regulation of cryptocurrencies, emphasising their importance for modern business.

A global approach to the taxation of cryptocurrencies

Tax regulation of cryptocurrencies can vary significantly from country to country, but a few common trends can be identified. Most countries recognise cryptocurrencies as property or financial assets, which implies the obligation to pay taxes on income derived from their sale, exchange or use as payment for goods and services. In addition, some jurisdictions have started to introduce tax rules specifically tailored to the features of cryptocurrencies, such as decentralisation and anonymity of transactions.

Main aspects of cryptocurrency taxation

• Capital gains and losses: In most countries, income from the sale of cryptocurrencies is taxable as capital gains. This means that investors must report profits and losses from their cryptocurrency transactions and pay taxes according to national laws.
• Value Added Tax (VAT): The VAT treatment of cryptocurrency transactions has been addressed in various ways. For example, the European Court of Justice has held that the exchange of virtual currency for traditional currency is exempt from VAT, highlighting the recognition of cryptocurrencies as a means of payment.
• Tax residency and international taxation: Cryptocurrency investors and companies should consider tax residency rules and international tax treaties to determine their tax obligations in various jurisdictions.

Practical recommendations for businesses and investors

• Record Keeping: It is important to carefully document all cryptocurrency transactions, including dates, amounts, exchange rates and purposes of transactions, to ensure accurate tax reporting.
• Understanding local laws: Businesses and investors need to familiarise themselves with the tax laws in the countries where they operate or have tax liabilities to avoid penalties and fines for non-compliance.
• Consultations with tax advisors: Given the complexity and constant changes in the tax regulation of cryptocurrencies, it is recommended to engage professional tax advisors to plan and optimise tax liabilities.

Conclusion

The tax regulation of cryptocurrencies is a dynamic area that requires careful attention from both businesses and individual investors. Understanding and complying with tax requirements in each specific jurisdiction is key to ensuring the legality of operations and optimising tax liabilities. In a world where cryptocurrencies play an increasingly important role in the financial system, adequate tax regulation becomes key to sustainable development and integration of cryptocurrencies into the global economy.