Comparison of crypto exchange regulation in America and Europe
Many investors increase their income by creating a crypto exchange. But the question of a severe choice arises – where is it better to do this? In the US or Europe? In this article, we will talk in detail about the Markets in Crypto Assets Regulation and consider the requirements for obtaining a license to start cryptocurrency activities in these jurisdictions.
Crypto exchange in the USA
A cryptocurrency license in this jurisdiction will allow you to exchange crypto assets. This document can also be obtained by those who plan to provide services related to electronic means. By getting a crypto license, you will be regarded as a company providing financial transfer services (Money Service Business, MSB).
Types of crypto licenses for MSB
A firm planning to be an intermediary in exchanging crypto assets for fiat will receive a Crypto Money Transmitter License.
A firm planning to be an intermediary in exchanging digital assets of one type for another will receive a crypto license MSB License and must also follow the laws in each state.
Conditions for MSB
To do this, follow these instructions. Register with the Treasury Department of that jurisdiction, and then the registration must be permanently renewed after 2 years. It would be best if you listed all your agents.
You must strictly comply with the AML (anti-money laundering) policy and notify the competent authorities if suspicious transfers are found.
Regularly keep records of activities and submit information if the transaction amount is more than 10,000 USD. It is necessary to follow specific instructions when conducting transactions, and all information about transfers must be securely protected.
There are other reports, and all of these instructions also apply to non-U.S. residents involved in cryptocurrencies.
Peculiarities of crypto licensing
The main features are laid down in the federal government. In addition to the existing conditions of the Regulator, each state has its requirements. They may differ from each other, and if you plan to provide services in several regions, then you need to go through registration in each of them. Please note that the instructions of the regulatory authorities may change from time to time, so it is recommended to monitor changes in the legal framework systematically.
Most of the new users in this region come to exchanges from search results, so you should think about SEO for crypto in advance. Experts will help you build a platform that appeals to search engines and government agencies.
All transactions with electronic assets, starting from 2018, are subject to taxation:
- e-coins issue salaries to employees;
- e-coins make payments for the services of a counterparty under a civil law contract.
All information about the transactions carried out is submitted to the competent authorities, and a declaration of income is presented for payment or other objects of taxation received in the form of electronic currency.
Crypto exchange in Europe
To conduct crypto activities in the European Union, you need to obtain an EMI license, which gives you the right to engage in the issuance of cryptocurrencies and make transfers. This process can take up to six months because many requirements and verification by the Regulator accompany it.
The first thing is the size of the authorized capital of at least 350,000 euros. His credit must be deposited into a bank account and remain untouched during authorization. The bank to open an account must be in the EU country where you will be licensed.
First, it is recommended to study in detail the conditions of the Regulator. In most jurisdictions, the Regulator performs a comprehensive check: the management structure, team, leading managers (checking for compliance with qualifications and professionalism), and more. Appoint at least 2 directors – they must be residents of EU countries.
Each of the jurisdictions has its own licensing rules in addition to the general rules of the PSD2 directive, which includes the following basic requirements:
- install appropriate software and modern technological base;
- develop methods for controlling various risks: for transactions and cyber attacks on software;
- managing the AML and KYC policy with a secure customer identification procedure;
- it is obligatory to have an autonomous customer account;
- accounting and auditing, and much more.
Obtaining an EMI license gives you the same rights as traditional payment institutions. You can conduct transactions and open client sub-accounts within your bank account. It provides the right to open cryptocurrency vaults. Clients exchange their fiat for e-coins issued by the organization and store them in e-wallets. Then customers can pay for its products and perform other payment transactions.
EMI licensing provides an opportunity to do business in EU countries and abroad. We’ve covered the general licensing rules in the US and Europe, but it’s up to you which territory is most suitable for your crypto company.