It would not be an exaggeration to say that the technology that goes behind connecting people and making communication global has contributed to the tremendous and unprecedented growth of every other technology! This is probably the biggest reason why a few concepts that are a little more than just a decade old have already revolutionized today’s businesses. On one side, we can credit everyday technologies like Uber and Tinder. In the other obscure and that might be oblivious to a common man but has been the cynosure of technology and finance experts in cryptocurrency and blockchain.
Crypto – The Next Big Thing In Finance?
The first cryptocurrency was introduced in 2009, and within such a short span of time, cryptocurrency and blockchain have positioned themselves as the next big revolution in the financial industry. The finance industry considers the blockchain as the next big technological fillip ever since the Internet. The best part is that just the surface of the full potential has been brushed so far, leaving alone their manifestations. The technology has been embraced by a few big names like JP Morgan Stanley and the Australian Stock Exchange. Although the number of institutions adopting blockchain and crypto might not be impressive, the market volume and market capitalization have shown a steady increase, showcasing its potential and positioning of exponential growth.
Introducing Crypto Exchanges
While the acceptance of cryptocurrency as a ‘currency’ might be in the territory of perennial questions, it has also opened an alternate avenue for making profit – the cryptocurrency exchange platform. The platform, as the name implies, facilitates simple and easy exchange of cryptocurrency between traders irrespective of their geographic location and time zones. The crypto exchange brings marked differences to the market, most of which is by virtue of the blockchain technology – swift, secure, and immediate transactions added with the benefits of immutability, transparency, and anonymity.
The Legal Position of Crypto Exchanges
There is no question on the possibilities of profitability when it comes to creating a business out of a cryptocurrency exchange. However, the shakiest and most uncertain aspect that needs to be addressed in this business is the legal dimension.
Gone are the days when cryptocurrency exchanges were scanty. Today, crypto exchanges are springing up left, right, and center and the legal regulators aren’t any longer willing to let go of rare exceptions. There is a growing need to understand the legal implications of a crypto exchange. To start with, since the business facilitates exchange between crypto and fiat assets, it is mandatory to either process a banking license or partner with a licensed bank or a payment processor that handles cryptocurrency in addition to fiat money.
Expert cryptocurrency exchange legal consultants will vouch for the fact that cryptocurrency laws are almost opaque and obscure at best. In this blog, we will attempt to demystify the hazy cryptocurrency loss from around the world.
The most favorable jurisdictions
The response of different countries and jurisdictions to the new technology and cryptocurrency has been spread across a wide spectrum ranging from extremely favorable to extremely hostile. Some of them have gone a step too far and have completely banned crypto exchanges. Let us look at a few major jurisdictions and the regulations.
When it comes to legalizing blockchain, Estonia leads the world. To start a crypto exchange business in Estonia, it is mandatory that the exchange must be registered in Estonia or at least, have a registered branch in the country. The business is also expected to follow KYC procedures and obtain a license under the MLTFPA (Money Laundering and Terrorist Financing Prevention Act).
Jurisdictions like Singapore, the United States, the United Kingdom, Canada, Australia, and Japan fill almost into the same category.
Singapore exchange platforms are required to register under the Accounting and Corporate Regulatory Authority in the city-state. The license for the business is issued under the Monetary Authority of Singapore [MAS].
Canada requires its cryptocurrency exchanges to comply with the AML and money services business laws. The exchange is also subject to all the Canadian securities laws.
In the United Kingdom, crypto exchanges need to register with the Financial Contract Authority [FCA]. In Japan, the exchanges need to be registered with the FSA of Japan [Financial Services Agency].
Australia and the United States require cryptocurrency exchanges to establish their compliance at multiple levels and with multiple regulatory authorities.
Australia mandates its exchange operators to hold the Australian market license issued under the authority of the ASIC [Australian Securities & Investment Commission]. Australian exchanges are also required to establish their compliance with AML/ CTF formalities and they should be registered with the AUSTRAC [Australian Transaction Reports & Analysis Centre].
In the United States, cryptocurrency exchanges are regulated at both federal and state levels. Needless to say, any crypto-assets that fall under the definition of security need to comply with the requirements of the SEC. In addition, KYC/AML formalities need to be followed without any lapses.
What we have seen here is just the tip of the iceberg. The complexity and the absence of uniformity in the legal requirements make the presence of cryptocurrency exchange legal consultants inevitable if you would like to start a crypto exchange business.
As a cryptocurrency exchange entrepreneur, your focus should be on the good aspects of your business. This is why legal compliance should be left to expert cryptocurrency exchange legal consultants. You can avail of the services of reputed cryptocurrency and blockchain development companies. In the vast portfolio of offerings, it is quite possible that legal assistance in establishing compliance for your cryptocurrency exchange will be one of them.
They will take care to understand all the aspects of your crypto exchange business and will ensure that your cryptocurrency exchange does not hit any stumbling blocks or speed bumps!