One can argue about the value of cryptocurrency for a long time, but it must be acknowledged that it has become an integral part of our lives. In the modern world, digital currency represents an alternative form of investment and plays a vital role in the economy by stimulating the development of new technologies and financial instruments. Its unique characteristics, such as decentralization, transparency, and innovative solutions, make it attractive for many spheres of activity.
Until recently, there was no regulation of companies dealing with cryptocurrencies in the United States of America. This issue began to be addressed in 2013. Authorities decided not to ban cryptocurrency and to create legal frameworks for its use.
As a result, exchanges and other organizations that carry out operations with cryptocurrency are required to:
- Register as financial services providers.
- Obtain a license for such activities.
- Report suspicious transactions to law enforcement agencies.
In this article, we will talk about a crypto license, specifically, the peculiarities of its registration, the requirements to meet in order to obtain it, the terms, and the cost. You will also learn why it is important to seek professional support from experienced attorneys.
Regulation of Crypto Activities in the USA
At the federal level, the following institutions regulate cryptocurrency activities in the USA:
- Commodity Futures Trading Commission (CFTC)
- Securities and Exchange Commission (SEC)
- Federal Trade Commission (FTC)
- Internal Revenue Service (IRS)
- Office of Foreign Assets Control (OFAC)
- Federal Reserve
- Financial Crimes Enforcement Network (FinCEN)
Each of these regulatory bodies imposes specific requirements regarding cryptocurrency regulation. Legislative bodies are regularly updated and refined to ensure a high level of confidentiality and anonymity for transaction participants. Special attention is paid to provisions aimed at compliance with anti-money laundering rules and combating criminal financing.
Despite strict regulation and stringent requirements, America remains an attractive jurisdiction for registering cryptocurrency exchanges and trading platforms. If you plan to start a crypto business, carefully familiarize yourself with the norms established by US legislation.
Features of Obtaining a Cryptocurrency License in the USA
A cryptocurrency license in the USA may be issued at the federal level (valid across the entire country) or at the state level (valid only in a specific state).
Licensing rules established at the federal level are intended to maintain financial security and prevent risks associated with money laundering. State-level licensing is more focused on protecting consumer interests and ensuring the reliability and solvency of applicants.
The type of license required for your activity is determined by the transactions your company will conduct. If you plan to engage in “crypto-fiat” transactions (cryptocurrency to fiat exchange), you will need a Money Transmitter License (MTL). If it’s “crypto-crypto” transactions (exchange of one cryptocurrency for another), you will need a Money Service Business License (MSB).
The MTL cryptocurrency license in the USA applies to financial institutions that:
- Provide services related to money transfers.
- Conduct foreign currency dealing.
- Engage in money or postal transfers.
- Exchange currencies exceeding $1000.
- Are issuers and sellers of traveler’s checks.
If you are interested in founding a cryptocurrency business in America, note that each state imposes its own requirements on such companies. Accordingly, if you wish to provide cryptocurrency exchange services in multiple states, your firm’s activities will need licensing in each state.
For example, to engage in cryptocurrency exchange in New York, you must obtain a special BitLicense license. In Illinois, individuals and legal entities exclusively dealing with digital currency do not require a license.
When operating outside the USA, you can limit yourself to a license valid in one state, which will give you the right to open the necessary bank account and conduct business.
Requirements for Licensing in the USA
To obtain a cryptocurrency license in the USA, you need to:
- Undergo registration with the US Department of the Treasury.
- Adhere to policies aimed at combating money laundering and terrorism financing.
- Report suspicious transactions to competent authorities.
- File reports for transactions exceeding $10,000.
- Maintain records of financial transactions.
- Keep accounting records for currency exchange.
- Follow the rules for transferring funds.
Most states also require licensees to demonstrate high financial capability. The budget requirements vary depending on the state, for example, $250,000 in California and $500,000 in New York.
Step-by-Step Guide to Obtaining a Cryptocurrency License in the USA
Obtaining a cryptocurrency license in the USA is a meticulous process that requires careful preparation, knowledge of the legislative framework, and compliance with numerous conditions.
The licensing procedure for cryptocurrency companies includes the following steps:
1. Company registration
Register your company with FinCEN as a financial services institution. Choose a unique name for it. Ensure that the name you’ve chosen doesn’t infringe on the copyrights of other companies and isn’t a registered trademark.
2. Open a bank account
Opening a bank account in the USA for a cryptocurrency company is more challenging than for regular firms due to the nature of the business and risks associated with cryptocurrencies. Therefore, it’s essential to find a bank that specializes in serving cryptocurrency companies or is open to this possibility.
3. Document preparation
Applying for a license usually involves collecting essential documents, including insurance policies, a business plan, identification documents of founders, beneficiaries, and financial statements. Requirements may vary depending on the state, as well as specific regulators and banks.
4. Payment of fees and charges
Find out what fees you need to pay for the licensing. The list and amount may vary depending on the state and type of license you’re obtaining. You must pay all fees on time and in accordance with regulators’ requirements to avoid delays and problems in the registration and licensing process.
5. Inspection by regulatory authorities
This process involves an assessment of the company’s activities and compliance with legislative rules and norms. Regulatory bodies may also analyze financial condition, capitalization, and solvency. You should prepare carefully for this process, ensuring compliance with all requirements and providing complete and accurate information about your company.
6. Negotiation of terms and consultations with regulators
This critical stage allows companies to better understand regulators’ requirements and clarify unclear points. Based on the information and consultations received, errors and deficiencies are identified, such as incomplete document packages, non-compliance with AML requirements, etc. You are given time to rectify identified issues, reducing the risk of rejection and speeding up the licensing process.
7. Obtaining a cryptocurrency license
If your company successfully completes the licensing process, you will be issued a license to provide services related to virtual currency. A cryptocurrency exchange license in the USA has no expiration date. However, you must periodically file reports and adapt to changes.
If you encounter difficulties in obtaining a cryptocurrency license, seek qualified assistance from Lawrange AA specialists. We will advise you on any issues and do our best to expedite the process of obtaining a cryptocurrency license in the USA.
Consequences of Violating FinCEN Rules
Financial institutions must be aware of all state requirements and federal regulations because ignorance of the law does not exempt a company from liability.
Non-compliance with FinCEN rules has serious consequences. The most common ones include:
- Administrative fines: FinCEN can impose fines on organizations that fail to comply with legislative norms. The amount varies from $50,000 for unlawful activities to $1,000,000 for violations related to international money laundering.
- License revocation: If a company or organization repeatedly violates the rules, FinCEN may revoke the license for cryptocurrency operations, leading to cessation of activities.
- Reputational damage: Failure to meet requirements can cause serious damage to the reputation of a crypto company. This will result in the loss of clients, investors, and partners, as well as a loss of public trust.
- Additional scrutiny: After violating FinCEN rules, companies may face enhanced scrutiny and monitoring by regulators.
In cases of serious violations, FinCEN refers the matter to court. In the judicial process, all case circ*mstances are considered, and if guilt is proven, criminal prosecution of those responsible for the violations begins.
To avoid unpleasant consequences and ensure legal conduct of business in the cryptocurrency sphere, it is important to comply with all requirements and norms established by FinCEN and to adhere to laws and regulations in financial activity.
Taxation of Crypto Companies in the USA
Taxation matters fall under the jurisdiction of the Internal Revenue Service (IRS) of the United States. In 2014, the IRS issued guidance defining cryptocurrency as property and noted that any transactions involving it must be taxed.
According to these legislative norms:
- Wages paid to employees in cryptocurrency must be taxed.
- Payments in digital currency between parties under a civil law contract are also subject to taxation.
- Information about payments in cryptocurrency must be reported to the relevant government authorities, and profits received by individuals in digital currency must be declared in US dollars.
In 2017, a new law was signed under which all cryptocurrency transactions are subject to taxation at the time of their execution.
Tax Rates
In the USA, taxes are levied on profits and sales. Let’s take a closer look at each:
- Profit Tax
The federal corporate income tax rate ranges from 15% to 35%, depending on the amount of net profit. If the net profit does not exceed $50,000, the minimum rate of 15% applies. The maximum rate of 35% applies if the company’s net profit is $18,333,333 or more.
In addition, a state tax of 0-10% is levied, depending on the state of registration of the company or obtaining the license. Thus, the total tax can be 15-45%.
- Sales Tax
In the USA, the sales tax ranges from 0-8%, depending on the specific state, excluding city and local taxes. This tax is considered regional, so each state independently sets its rate based on factors such as:
- Economic situation.
- Presence of developed or developing economic sectors.
- Popularity of the product.
- Whether the product is imported or produced domestically.
Additionally, some states have separate districts where a local surtax is applicable. For example, Delaware does not have a sales tax at all, and in Alaska, there are cities and individual boroughs where their own rate of up to 7% can be set, although officially, this tax is absent at the state level.
Timeline for Obtaining a Cryptocurrency License in the USA
The timeline varies depending on several factors, including the state where you want to open your crypto company. Usually, it takes more time than registering a legal entity. On average, obtaining a cryptocurrency license in the USA takes two to six months. This is provided that there are no issues or misunderstandings during the document collection and application submission process.
Cost of Obtaining a Cryptocurrency License in the USA
Various factors influence the final cost of obtaining a license to operate with cryptocurrency:
- State of registration: Each state sets its own license fee rates and requirements for documentation and registration processes.
- Exact list of future services: The more complex and diverse your services, the higher the expenses will be when obtaining the license.
- Region of operation for the future crypto company: Different regulatory requirements and standards may apply depending on the region where your company will operate.
It is also worth considering expenses related to legal consultations, implementing technological solutions, and ongoing compliance costs.
You can contact qualified specialists at the Lawrange Attorneys Association to find out the exact cost of obtaining a license for a cryptocurrency exchange in the USA.
Why Choose Lawrange
Do you want to start cryptocurrency operations in the USA and want professional legal assistance? Turn to the Lawrange Attorneys Association. Our team consists of experienced lawyers, legal experts, accountants, and IT specialists who have a deep understanding of cryptocurrency license registration issues in America.
We offer a wide range of services related to comprehensive support for cryptocurrency companies, including registration, licensing, coordination with regulators, and protection of rights.
We know and love what we do. Our experts delve into each new business case and consider all the nuances and details to help you open your crypto business. Thanks to our thorough understanding of the international legal framework of the USA and a proactive approach, we guarantee our clients the fastest and most effective solutions.
With our assistance, you can register a cryptocurrency license in the USA without any problems or delays.
Conclusion
The US is one of the most convenient countries for cryptocurrency business. Major hedge funds, cryptocurrency exchanges, and other cryptocurrency-related companies are registered and operating here.
Moreover, many goods and services can be freely paid for not only with fiat or electronic money but also with cryptocurrencies. In the United States, specialized cryptocurrency ATMs are widespread, allowing the exchange of national currencies and cryptocurrencies.
Furthermore, the North American market is one of the most profitable and largest markets in the world. However, a license to trade cryptocurrency in the USA is necessary for your company to engage in such activities.
The process of obtaining it is quite complex and requires specialized legal expertise. Seek the support of Lawrange specialists and gain confidence that your company will meet strict standards and the licensing will proceed smoothly and quickly.
FAQ
What types of cryptocurrency activities require licensing in the USA?
In the States, licensing is mandatory for:
- Platforms providing cryptocurrency exchange services for fiat currencies or other cryptocurrencies.
- Cryptocurrency exchanges.
- Certain types of cryptocurrency wallets, especially those offering additional services such as storage and asset management for clients.
- Payment systems for payments and transfers using cryptocurrency.
- Companies offering cryptocurrency asset management services, investment funds, etc.
What risks are associated with obtaining a crypto license in the USA?
Obtaining a cryptocurrency license in the USA sometimes entails certain risks. For example:
- The application process may be prolonged indefinitely.
- The cryptocurrency industry is subject to rapid changes in legislation and regulation.
- Failure to comply with regulatory requirements or violation of license terms may result in fines, sanctions, or even license revocation.
- The cryptocurrency sphere is competitive and dynamic, making market entry difficult for new companies.
How is customer data confidentiality ensured in the cryptocurrency sphere in the USA?
Encryption, multi-factor authentication, and secure server centers are utilized to ensure customer data confidentiality.
To maintain a high level of security, cryptocurrency companies regularly conduct security system audits and penetration testing to identify and eliminate potential vulnerabilities. They must also comply with various regulatory standards and data protection legislation, including the US privacy information law.
ORDER A CRYPTO LICENSE IN USA
