The phenomenal rise in the price of bitcoin, ethereum and other cryptocurrencies in the UK has generated huge demand that attracts new people to cryptocurrencies. To run a legal cryptocurrency exchange business you will need a license.
The process of obtaining licenses that allow you to conduct activities related to the exchange of cryptocurrencies requires a lot of time and serious preparation. There are various jurisdictions, where you can obtain a license to engage in activities related to cryptocurrencies and blockchain technology. In this article, we will consider the procedure for obtaining a license for crypto activities in England.
LEGAL STATUS OF CRYPTOCURRENCIES IN THE WORLD
Today, most countries do not have a unified global legal framework and practice governing cryptocurrencies.
Some regions are trying to meet the conditions of a rapidly changing industry are developing a regulatory framework for virtual money, while other jurisdictions are trying to introduce tough measures to strictly regulate and ban activities related to cryptocurrencies and their production. The list of countries is regularly updated when new legislation regulating fintech activities is developed and implemented in such territories. At the same time, conditions in new jurisdictions may turn out to be much more attractive, and for this reason, cryptocurrency exchanges may migrate.
UK CRYPTOCURRENCY EXCHANGE LICENSING
The growth of the crypto asset market has attracted the interest of both the general public and regulators, which has led to the development of the regulatory framework in the member states of the European Union and the European Economic Area.
In the UK, all blockchain operations are legalized by the government and the banking sector. The financial regulator FCA is the responsible authority for all financial matters.
The FCA is working with the Central Bank of England and the Treasury to establish a system for managing the risks associated with cryptocurrencies, especially with a focus on AML/CTF and monetary security. All companies that carry out crypto activities in the UK, or conduct transactions using digital and crypto currency, must register with the FCA.
Licenses for the exchange of cryptocurrencies are issued by the FCA regulator.
On January 10, 2020, the new UK Anti-Money Laundering and Fraud Financing Regulations (AML/CTF), the MLR Amendment, came into force. Now if you plan to open a crypto company in the UK, please examine all MLR Amendment updates from 2017 AML/CTF and Funds Transfer (Payer Information) Regulations and transposes the EU Fifth Anti-Money Laundering Directive (MLD5) into the country’s domestic law.
Capital gains from transactions with cryptocurrencies are taxed, as in the United States.
- Register a company in the UK; establish an office
- Register with the FCA.
- Get registered as a taxpayer. When exchanging cryptocurrencies, corporate tax is withheld, but VAT is not charged (as with mining).
- Open a corporate bank account to conduct transactions with cryptocurrencies and convert them into fiat funds.
- Collect documents for obtaining a license for the exchange of crypto-currencies, taking into account the requirements of AML / KYC standards.
AS A REGULATED PERSON, YOU MUST:
- Conduct a money laundering risk assessment based on your services, products and customer base.
- Document an AML policy that describes your internal anti-money laundering procedures.
- Ensure that all employees have completed AML training.
- Keep an annual report for audit purposes.
- Adopt a risk-based KYC process and apply an appropriate level of customer due diligence.
Types of cryptocurrencies
It is necessary to understand which tokens are regulated and which are not, in order to understand what types of activities are subject to legal acts.
TYPES OF CRYPTOTOKENS
Investment: “specified investment” under the Regulated Activities Order (RAO), excluding electronic money. They may grant ownership, the return of a certain amount of money, or the right to a share in future profits. They may be transferable securities or other financial instruments. tools according to the MiFID II Directive.
Any tokens that are not investment or electronic money tokens are unregulated. This category includes utility tokens that can be exchanged for o to a specific product or service (provided using the DLT platform).
This category also includes tokens such as bitcoin, litecoin and their equivalents, often referred to as "cryptocurrency" or "payment tokens". They are decentralized and designed to be used as a medium of exchange.
Obtaining a crypto license in the UK is a promising solution, since the United Kingdom is today considered one of the most powerful platforms for the functioning of crypto-currency activities. The United Kingdom is seen as a platform for launching blockchain startups and holding ICOs in the EEA countries.
If you need a license to exchange cryptocurrencies or build a business structure for mining cryptocurrencies, then Astorts specialists will develop the best solution for you.
We can advise and provide the client with a solution both on a specific issue and take a comprehensive approach to the development of a large project according to the customer’s vision and provide legal support for blockchain projects of any complexity.
We provide legal advice on the legal status of cryptocurrencies and provide legal support for blockchain projects in different jurisdictions.
He uses to dedicate part of his life to inspire others and help them achieve the most out of their lives. Since he was 20, he had successfully founded and managed several companies operating in the field of management consulting, wealth management and fintech. He is Member of Institute of Directors in London, Member of Changer Club in Riga, Member of Fintech Association of Hong Kong, Member of Singapore Fintech Association, Member of Non Executive Director Association in London and Member of Alumni Network of Draper University in San Francisco. He loves travelling, he is a cigars lover, an amateur golfer and a dapper man.
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