The business of cryptocurrency has become huge over the years, and many people are looking to invest in the industry. If you are an investor looking to be a part of the cryptocurrency revolution or a company looking to invest in the cryptocurrency industry, by creating your own bitcoin exchange, away from the bottlenecks found in mainstream Europe and America, then you should be taking a good look at expanding into the Asia market. In this post, we focus on some Asian countries and how receptive they are regarding cryptocurrency.
Japan has always been receptive to the use of bitcoin and cryptocurrencies in general. In fact, it is the first country to regulate the crypto currency space in Asia.
In April 2017, the country’s Payment Services Act was re-examined in order to support the cryptocurrency business model. Once you satisfy the extremely demanding Japanese regulations, you can run your cryptocurrency exchange without much hassle. However, you should know that your white label bitcoin exchanges and investment are not valid until registered. You also need to obtain a Virtual Currency Exchange License with the Financial Services Authority (FSA).
The minimum capital required for your bitcoin exchange company, in theory, is JPY 10 million (approximately 93,000 USD); however, in practice, what the regulator is only interested in is to make sure that your operating capital is adequate for the size of your exchange. So far, any exchange with a reserve of at least JPY 50 million (approximately USD 500,000) will be regarded as eligible for business.
The Japanese FSA also demands strict compliance with their rules. The company must also make sure that they hire the proper staff that know about cryptocurrency systems as well as an external auditor. Your company’s crypto exchange software must be submitted to the regulators for verification and thorough analysis in order to make sure that it satisfies highest cybersecurity requirements. If non-Japanese nationals created the firm, then they must hire Japanese personnel. Most Japanese personnel in bitcoin exchange white label firms act as representatives who will be in charge of communicating with the regulators.
Each license application may take between six months to 1 year before it is ready to go through but the JFSA will usually approve or reject it within 2 months.
Thus, if you think you can run an exchange in the most developed and most competitive cryptocurrency market in the world, and you have the resources to satisfy all the requirements, including the high tax rate (Japan’s effective corporate tax rate is up to 34.60%), then you should be looking at Japan.
Labuan has evolved into a major hub for business and money in the Eastern continent because its laws are favorable to business establishments, its taxes are low, and it is entirely in sync with international standards on due diligence and transparency. Companies that establish in Labuan may have to pay a 3% tax or a RM 20,000 fee on their trading income.
For you to establish your exchange in Labuan, you must have made the right arrangements to effectively combat the risk of financial misappropriation, as well as counterterrorism expenditure. Your exchange will also have to scale through the rules and policies that are contained in the document created and monitored by the Bank Negara Malaysia, and the FSA of Labuan. The Labuan FSA must approve your bitcoin exchange business and must apply and obtain a Money Broker License.
If your system relies on a white label crypto exchange software, or any kind of crypto exchange software, it will be checked thoroughly to make sure it is compliant with the guidelines that deal with computer security risk management as issued by the LFSA. The Financial Service Authorities of Labuan will also carry out a proper test for all the promoters of the business as well as members of the management team.
Establishing an exchange development company also requires a minimum capitalization of RM 500,000 (approximately USD 120,000). Additionally, you will be required to have some commercial substance (e.g., an office in Labuan). The entire licensing process usually takes 4 to 6 months.
Labuan is an option to consider for those who wish to set up a regulated bitcoin exchange development company, which will be able to work with virtual currencies in a favorable monetary space. Also, while some of the banks may not be too keen on the idea, you will still be able to open bank accounts for cryptocurrency exchanges in both Malaysia and Labuan, especially if you are running a company that is already incorporated and regulated in the zone.
China currently has a ban on bitcoin and other cryptocurrency exchanges. However, the regulatory bodies continue to show great enthusiasm towards the application of blockchain technology as a tool to modernize China’s financial systems. In a document signed by five Chinese government agencies, led by the PBOC, in 2013, Bitcoin is defined as an online legal asset, but not as a means of exchange in a non-virtual environment. Today, five years later, little has changed from the PBOC in regards to that proclamation.
However, Article 127 of the General Rules of the Civil Law of China, which took effect on 1 October 2017, provides in regard to Bitcoin exchange software and other crypto exchange software, that all the rules and guidelines that deal with the protection of data and online assets and liabilities on the internet must be obeyed without option of legal recourse.
Therefore, in recent years, various guidelines and papers issued by the government have endorsed blockchain technology and white label crypto exchange software. Blockchain technology has now been categorized alongside big data and artificial intelligence as a potential spot for technological advancement.
This does not mean, however, that blockchain technology is now fully accepted by the PBOC. To date they still have working committees on the subject, working with other cybersecurity experts to research more about blockchain technology and digital currency and how they can serve the real, non- virtual economy.
If you are looking to start a regulated crypto exchange development company in Abu Dhabi, you will be required to prove that your Bitcoin exchange software is compliant with KYC/AML & CTF and consumer protection regulations and are in line with the technology governance guidelines. You will require an application fee is USD $125,000 as well an annual fee of USD $60,000 and a levy on the average daily volume between 0.0006% and 0.0015%.
In Abu Dhabi bitcoin white label exchanges are regulated in a similar manner to “Multilateral Trading Facilities” and are required to have in place the proper market surveillance protocols, settlement processes, transaction recording, transparency & public disclosure mechanisms and investment exchange-like operational systems and controls.
White label Exchanges must also request authorization and will be granted a Financial Services Permission to carry out the regulated activity of OCAB. An OCAB will be required to hold adequate capital resources, similar to Recognized Investment Exchanges.
As at April 2018 No bitcoin or cryptocurrencies exist in Singapore that are recognized as market operators by the MAS (Monetary Authorities of Singapore). However, MAS has been working on a set of guidelines for people looking to establish cryptocurrency exchanges. One of them is the proposed size and structure of the market operated by the corporation. Another is the services to be provided or that are being provided by corporation, the kind of people who will be affected if the company gets into trouble and finally, the nature of investors and participants in the trading and the exchange company.
At the moment India has no regulations concerning cryptocurrency regulations, and this lack of regulations has affected the industry negatively. The government seems to believe that cryptocurrency trading is just like a Ponzi scheme and is accused of investors by choking the Industry practitioners this has created a hostile environment for digital currency trading. As a result of several petitions to the office of the Prime Minister, the government is expected to draft regulations in 2018. So as from 2019, investors can expect a growth industry in Indian cryptocurrency.
Malta has become a major hub for cryptocurrency in Europe, because the Maltese government has shown a friendly stance towards cryptocurrency. Even though cryptocurrency does not have an official status in Malta but the government of Malta recognizes that some cryptocurrencies can exist under current financial services laws. Malta is also working towards becoming the first country in the world to grant legal status to cryptocurrency. The aim of the Maltese government is to continue to create healthy environments for cryptocurrencies to grow.
Currently is Estonia, cryptocurrencies are not legal tender. However, to be regarded as a legal entity, every cryptocurrency must register with the financial intelligence unit. In 2017 the government signed the 2017 AML/CFT legislation, under which a cryptocurrency business can legally operate. Under the rules, a cryptocurrency exchange must obtain two licenses from the Financial Intelligence Unit of Estonia, the Virtual Currency Exchange Service License and the Virtual Currency Service License.
Currently the government classifies cryptocurrencies as digital assets but do not tax them under Value Added Tax.
Cryptocurrency exchanges have been building up over the last few years and Asia seems to be the main new destination, away from saturated markets of Europe and America. However, investors are advised to check out rules and regulations issued by the financial authorities of different countries in the continent before deciding where to invest and making any investment.