How to choose a crypto licence: a guide for those building a real business
Crypto licensing: what you need to know before choosing a jurisdiction
Most licensing mistakes are made not at the application stage, but earlier — when a jurisdiction is chosen based on cost or speed, without asking oneself a few key questions. This guide examines the most important of these and explains the practical implications of each.
First the business model, then the country
Before looking at a map of jurisdictions, you need to answer one question honestly: what exactly will the company be doing?
At first glance, most crypto projects seem similar. But for a regulator, there is a world of difference between ‘helping a client exchange BTC for ETH’ and ‘accepting fiat money, holding clients’ assets and managing wallets’. The nature of the business determines exactly which licence is required. And a ‘crypto licence’ means fundamentally different things in different countries.
AML registration is a simple form of licensing. It is suitable for basic exchange services without asset custody. It is quick and cheap — but inspires little confidence in banks and partners. Dealing with fiat currency and custody often falls outside this framework.
A full licence is a regulatory regime involving supervision. It entails requirements regarding capital, office space, an MLRO and reporting. It is more expensive and takes longer – but it opens up access to banks, institutional clients and serious partners.
A common mistake: clients choose a jurisdiction based on the name of the licence rather than what it actually permits them to do. A ‘crypto licence’ does not always mean the right to handle fiat currency, hold client assets or attract retail users from other countries.
Custody — the issue that changes everything
One of the key dividing lines in crypto regulation is whether a company will hold client assets. If not, many jurisdictions offer a relatively straightforward regulatory framework. If so, the level of requirements and scrutiny from regulators, banks and partners increases dramatically.
In practical terms, this means you need to address not only legal but also operational issues in advance.
— Who controls the private keys — the company or the client?
— Are hot and cold wallets used, and is there an external custody provider?
— How are client funds segregated from the company’s funds?
— Where will clients’ fiat money be held — are segregated accounts required?
These questions often arise after the licence has been granted — when the client thinks the hardest part is behind them. But it is precisely these questions that kick off the due diligence process at a bank or with a payment partner.
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A licence is not the same as a bank account
Many people come to us saying, ‘We need a crypto licence’, but in reality, their business needs something completely different: a bank account, a PSP partner, fiat payment channels, and the ability to accept and make payments. A licence helps — but it does not guarantee access to banking services.
A bank looks at more than just whether you have a licence. It assesses the whole picture: the reputation of the jurisdiction, the UBO and directors and their track record, the geographical spread of clients, the effectiveness of AML procedures, the sources of funds, and sanctions risks.
The following factors increase the chances of opening an account: a clear business model, a strong team with a good reputation, effectively implemented AML procedures, substance in the jurisdiction, a respected regulator, and a willingness to provide detailed documentation.
A cheap and quick jurisdiction often looks attractive on paper — but then the company finds itself unable to open an account for months on end. Saving on the licence fee turns into a delay in launch and unplanned expenses.
Two different timeframes: time to licence and time to go-live
The time taken to obtain a licence is an important factor, but it is often misleading. Obtaining authorisation does not mean you can start operating tomorrow.
Once the licence has been granted, there is a whole post-licensing phase to go through:
— Opening bank accounts, onboarding KYC/KYT providers, and agreeing terms with payment service providers (PSPs).
— Setting up transaction monitoring, a Travel Rule solution, and sanctions screening.
— Implementing blockchain analytics, preparing internal procedures, and training the team.
Only then is the company ready to serve customers and generate revenue.
We always distinguish between these two concepts: ‘time to licence’ – when a company obtains regulatory status – and ‘time to go-live’ – when the business is actually ready to operate. It is the second metric that matters to the client.
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True cost: focus on the structure, not the licence
At the outset, it is natural to compare the cost of obtaining a licence. However, it is more accurate to calculate the total cost of ownership of the structure over a two- to three-year period.
One-off costs include government fees, legal support for the application, preparation of the AML package, and the corporate structure.
Recurring costs include the MLRO, accounting, auditing, compliance tools, blockchain analytics, office space, registration renewal and bank fees.
In some jurisdictions, the initial set-up costs are lower, but ongoing operations turn out to be expensive or unpredictable. In others, the initial costs are higher, but banks have greater confidence in the entity, the requirements are clearer, and it is easier to scale up. A good choice is not necessarily the cheapest option, but the one that aligns with the business’s objectives and does not create hidden problems a few months after launch.
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AML is not just a folder of documents, but part of day-to-day operations
During the licensing phase, AML is often seen as a set of templates: a policy, a risk assessment, a KYC procedure. But in practice, it is a dynamic process that must function every day.
A company must understand: who it accepts as clients, which countries it considers high-risk, which wallets it blocks, how it monitors suspicious transactions, when it submits reports, how it updates client data, and how it retains evidence of the decisions made.
For crypto businesses, blockchain transaction analysis is added to standard KYC: wallet screening, exposure to sanctioned wallets, mixers and darknet markets. If the AML system exists merely ‘for the sake of the licence’, problems are almost inevitable. They will become apparent at the first serious banking onboarding or major client transaction.
‘Operating globally’ is not just a matter of having a single licence
Many projects want to operate ‘globally’. However, holding a licence in one country does not automatically grant the right to actively attract customers in another — particularly when it comes to the US, the EU, the UK, Canada or the UAE.
It is important to distinguish between passive customer service, active marketing, targeted advertising and having local partners — all of these have different legal implications. You can obtain a licence in one jurisdiction whilst creating regulatory risks in a completely different one.
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It is therefore necessary to determine in advance: which markets we operate in, which we exclude, where geo-blocking is required, what disclaimers must be included on the website, and which clients we do not accept under our risk policy.
What questions to ask when choosing a jurisdiction
We always start not with the name of the country, but with a few practical questions:
Activities: exchange, custody, fiat, OTC — what exactly does the company do?
Clients: retail users, businesses or institutional clients?
Markets: which countries will users come from?
Banking: Do you need a bank account, a PSP, fiat payment channels or segregated accounts?
Team: Who are the UBO, directors and MLRO — what is their background?
Time horizon: What is more important — speed of market entry, the jurisdiction’s reputation or growth potential?
Only once you have answers to these questions can you meaningfully compare jurisdictions.
A crypto licence is not a one-size-fits-all product. It is a tool that must be tailored to a specific business model. Choosing the wrong jurisdiction could result in the company obtaining formal status but being unable to open an account, on-board partners or serve the right clients.
The right choice helps to build a functional structure: with a clear regulatory status, realistic banking arrangements, a manageable compliance burden and the opportunity to grow the business.
