Licensing Cryptocurrency Businesses: A Guide to Regulation

For crypto founders, regulation is often an afterthought until their business starts gaining traction. However, licensing can have a significant impact on a company's operations, services, and relationships with financial institutions.

Crypto licensing is not just about finding a way around regulations but understanding how to operate within them without harming the commercial side of the business. This requires a different mindset from what many founders are used to.

Before looking at jurisdictions or licenses, it's essential to map out the actual customer journey and understand the activities involved in the business. What services does the company provide? Does it handle digital assets on behalf of clients? Is it a brokerage or custody provider? These distinctions can be crucial in determining regulatory requirements.

The corporate structure behind the project is also critical, as it can create a regulatory puzzle. A license obtained by one company may not automatically make every entity within the wider group regulated. Founders should think about ownership, management, operational functions, intellectual property, technology providers, compliance responsibilities, and customer-facing activities as interconnected parts of the same structure.

Regulators want to understand the people behind the company, including who owns it, who controls it, and who is responsible for compliance. A well-designed compliance function should have clearly defined responsibilities rather than simply existing as a collection of policies stored in a folder.