Cryptocurrency has become more than just another buzzword in the business world. It is transforming the global economy and the ways we conduct business. However, many people still have a vague understanding as to how to navigate banking, laws and regulatory licenses to set up a legitimate cryptocurrency business.
Types of cryptocurrency businesses
Significant growth in the crypto space has been the catalyst for an industry of related businesses looking to capitalise on the boom. From new coin offerings, exchanges and traders excited by volatility rarely seen on stock markets, thousands of entrepreneurs are building new crypto related businesses.
Common crypto business models include:
• Issuing of new coins
• Cryptocurrency exchanges
• Digital wallets
• Cryptocurrency payment gateway solutions
• Crypto trading
Where is the best location to set up a cryptocurrency business?
Government ambiguity and apprehension around cryptocurrencies is due to concerns over its potential use in unregulated and illegal activity, which has seen a swarm of global crackdowns on the industry (the most recent of which was in China in July 2021). Those looking to start a crypto currency business need to take the following into consideration:
• Crypto regulations are constantly evolving. While governments and regulatory agencies around the world are still trying to find the best way forward around regulating crypto, there will continue to be risk for investors in the space.
• How blockchain technologies are categorised and interpreted can vary substantially between jurisdictions. As a result, international operations will need to take into consideration with widely different rules and treatment in each country.
Government and bank standards, scrutiny and requirements are often greater for crypto businesses than for more ‘traditional’ businesses, often due to concerns over anti money laundering (AML) and illegal financing concerns. Banks are reluctant to board crypto businesses, and even if they do, they request greater amounts of due diligence on directors, shareholders, and beneficial owners, as well as details of source of funds and transactions.
• For blockchain implementation for financial services (crypto, exchanges, financial tokens etc.), many jurisdictions do not have clear regulatory authorities in place. Compliance requirements are complicated, involving multiple organisations and agencies.
Setting up a cryptocurrency company is therefore best suited to the few jurisdictions where there are clear legal and regulatory frameworks.
There has been a dramatic rise in demand for clients seeking crypto friendly locations in which to set up their business.
“The main criteria for selecting a location to operate a crypto business are government sentiment towards the industry, clear long term regulatory frameworks as well as access to safe and quality banking.
For example, Switzerland regulates crypto in the same way as it does traditional financial instruments. The UAE, meanwhile, governs crypto with its own specific authority and framework built around it.
There is no one-size-fits-all location for crypto-related business set ups, with entrepreneurs still concerned with traditional set up factors such as the geographic location, ability to operate remotely, taxes and set up costs.
The crypto industry is notoriously unpredictable, and what goes today can change very quickly.