CRYPTO LICENCES

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 The rising popularity of cryptocurrencies and digital assets make the choice a very important one.  Scams, Ponzi schemes and other bad practices have the potential to spoil the market.  Therefore, firms look to be licensed in jurisdictions where there are regulations set by competent authorities to ensure such reputation-damaging practices are avoided. 

The credibility of a cryptocurrency or digital assets firm will depend its regulatory approval and the jurisdiction from which it's regulated.  And, the firm's licence is one of the most important criteria for a consumer.

But, cryptocurrency and digital assets' regulation is evolving - making questions vital to a firm's existence difficult to answer.   

 As the industry continues to grow, authorities are challenged with ways regulate blockchain and cryptocurrency markets.  But defining it, let alone creating a regulatory framework, is often the biggest obstacle.  Different approaches are being taken with the result leading to regulatory divergence, less standardization and unevenly regulated markets. 

What type of licence best fits the firm's business model?  Which jurisdiction should you choose?  How will you ensure compliance with the regulations?

The application procedure for a cryptocurrency or digital assets' licence is complex and time consuming.  Enlisting our support to guide you through it will ensure that you follow all the correct procedures and supply the right documents to the regulator.  This will save you time and money. 

The evolution of blockchain, cryptocurrencies and digital assets is bringing about a sea change in industry and opportunities.  Blockchain enables platforms from which several business models are built including:

 Exchanges, Wallets, Trading, ICOs and Mining.

Exchanges

A cryptocurrency exchange, or a digital currency exchange (DCE), is a fintech platform that enables users to buy and sell cryptocurrencies or digital currencies for other assets, such as conventional fiat money or other digital currencies.

A cryptocurrency exchange may be a market maker that typically takes the bid–ask 'spreads' as a transaction commission for its service or, as a broker, a matching platform, simply charging fees.

Wallets

A cryptocurrency wallet is a software platform that stores private and public keys and interacts with various blockchain to enable users to send and receive digital currency and monitor their balance.

In addition to this function of storing keys, a cryptocurrency wallet offers the functionality of encrypting and signing information such as the execution of a smart contract, a cryptocurrency transaction, identification or legally signing a 'document'.  In this way it works like most any electronic wallet - receiving and making payments. like an Electronic Money Institution or Money Service Business.

Trading

Cryptocurrencies can be traded in two ways: Buying or selling actual tokens traded on a cryptocurrency exchange, or trading derivatives based on the underlying cryptocurrency price.  

A trading platform often enables a user to buy and sell cryptocurrencies without having to fund the full value of the asset to open a position, otherwise know as trading on margin or using leverage.  The trading platform may charge the 'spread' or a commission for the transaction.

ICO

An initial coin offering (ICO) is the cryptocurrency industry's equivalent to an initial public offering (IPO).  A company looking to raise money to create a new coin, app, or service launches an ICO as a way to raise funds.  The process involves complex legal advice, the creation of a reliable project structure, management of all marketing processes, and technical audits.

Mining

Cryptocurrency mining is a transactional process that involves the use of computers and cryptographic processes to solve complex functions and record data to a blockchain.  The process involves validating data blocks and adding transaction records to a public record (ledger) known as a blockchain.  Miners, ­­who are like auditors, are then rewarded with  cybercurrency.  Mining ensures the validity of the currency, with no one able to use the same money twice.  Unlike traditional currencies, cryptocurrencies don’t belong to a central bank, meaning they have no government backing.  However, when recognized by an exchange, this type of international currency, can be traded, bought and sold.

 Regulator's views of cryptocurrencies and digital assets vary greatly from one country to another - and, in many cases, it's either banned or there isn't any regulation.  There is no common directive or any international agreement forming the foundation of global acceptance.

Nevertheless, the emergence of different regulatory perspectives provides signs on ways authorities apply regulation.

The USA, Canada, Japan have well-developed and progressive legislation providing guidance.

Regulation within member-states of the European Union is inconsistent, but Estonia and Malta lead the region with distinctively different approaches.  Whereas Sweden considers cryptocurrency as a traditional fiat currency.

Some developing nations like The Bahamas are are making an early move to take advantage of fintech opportunities.  But, on the other end of the spectrum, many less developed countries are unprepared to deal with the subject.

South American countries are are generally unsupportive of crypto currencies and the environment for digital assets is unfavorable.

China's regulations are restrictive but the country is leading the development of a digital currency. 

Singapore and Australia are creating rules and regulations and offer a regulatory "sandbox" where firms may demonstrate financial products and services in a collaborative effort to write better regulations.

With many countries developing legal frameworks purposed to establish a better rules and regulations over cryptocurrency markets and digital assets, and others seeking to prohibit the same, seeking our professional advice is important when making decisions and planning your next steps.  Our guidance is vital to your success.