The New York BitLicense turned five years old this year. It was the first crypto license of its kind, and several other crypto licenses have been developed since. In this article, we take a look at the various licenses that are available globally for service providers today.
Regulations per region can vary greatly from heavily restricted to unregulated, and according to the latest FATF guidance in their Red Flag Indicators report, transactions related to unregulated regions should be considered to be a warning sign for unusual crypto activity. Virtual asset service providers should be monitoring which regions transactions on their platform (or through their business) are coming from and going to.
INTERNATIONAL BITCOIN FUND FLOWS ANALYTICS MAP
With this new report in mind, what does regulation look like in different regions globally? Which countries have stricter regulations, and which countries have actual licenses?
New York BitLicense
In 2013, the New York Department of Financial Services (NYDFS) began receiving applications for virtual asset money transmitter licenses. In June 2015, the first official New York Bitlicense was awarded to Paxos (formerly itBit), followed soon after by Circle and Gemini Trust. Despite Superintendent Benjamin Lawsky (the creator of the Bitlicense) stepping down, the NYDFS continued to issue licenses to compliant services. Genesis Global Trading, Square, and BitPay were amongst those to receive Bitlicenses, and in May 2020, ErisX became the 25th company to receive a BitLicense.
Swiss FINMA License
Swiss authorities have been considering regulations for cryptocurrencies since 2014, and in 2018, FINMA the Swiss Financial Market Supervisory Authority, partnered up with SIF (the Swiss State Secretariat for International Finance) to establish anti-money laundering regulations for digital assets. In 2019, FINMA outlined a stringent approach for combatting money laundering on the blockchain, and they analyzed 60 Initial Coin Offerings for violations. FINMA has outlined here the crypto services that should be applying for a payment systems license eg. banking, Fintech services, or securities.
UK FCA License
In January 2020, the Financial Conduct Authority (FCA) became the official regulator for cryptocurrencies in the United Kingdom (UK.) The FCA urged crypto service providers to register by June 2020, to give the organization a six-month window to review all license applications. A further reminder was sent out to crypto businesses in June, to combat ML and TF. Registration is also required by those involved in crypto activities.
Estonia FIU License
Current legislation in Estonia classes cryptocurrencies as a virtual value. In Estonia, cryptocurrency service providers need a special license to conduct business. Virtual asset service providers can apply for two different licenses: service providers who exchange a virtual currency against a fiat currency and virtual currency wallet service.
Regulation in South Korea
South Korea has been at the forefront of innovation for and adoption of blockchain technology and cryptocurrency regulation. In March 2020, the South Korean National Assembly unanimously passed legislation to fully regulate and legalize cryptocurrencies and exchanges within the state. The legislation will come into full effect in March 2021.
South Korean regulators are also increasing AML and KYT measures for crypto considerably, with plans in place to ban the utilization of anonymous or privacy coins.
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