Launching a Crypto Business: Comparative Guide for EU and US
The world of cryptocurrency is evolving, and entrepreneurs are keen to establish their crypto-based businesses in regions that offer a conducive environment. Two prominent options are the European Union and United States. More about the process of launching a crypto business in the EU and the US in this article.
When it comes to launching a white label cryptocurrency wallet or a crypto exchange, the EU and US present distinct opportunities and challenges.
Business in US
Initiating your business in the United States holds several benefits:
- Customer Base: the United States boasts a substantial and diverse customer base, offering significant growth potential;
- Financial Markets: the US financial markets are well-developed and offer a robust infrastructure for cryptocurrency businesses to thrive.
Business in EU
Starting a cryptocurrency project in the EU also provides compelling pros:
- Regulation: the EU regulations aim to harmonization across member states, simplifying operations in multiple countries. Furthermore, some EU member-states offer regulatory sandboxes, facilitating the testing of financial innovations in a controlled environment, ensuring a smoother market entry;
- Global Reach: most crypto licenses issued by EU member states (except for Estonia and the Czech Republic) grant permission to operate cryptocurrency exchanges globally. This extends to regions without local cryptocurrency regulations;
- Market Entry: the EU excels in the swift acquisition of necessary licenses, with an average processing time of 1 to 2 months;
- Cost: the cost of conducting business, with legal fees, salaries, rent, is lower than in the US. Additionally, EU jurisdictions typically impose less stringent capital requirements. Initial costs for an EU crypto license range from €15,000 to 20,000, along with a 35% contribution from the €125,000 share capital requirement;
- Ecosystem: tech-centric nations like Estonia have earned reputations as nurturing environments for startups. Furthermore, the EU’s commitment to the free movement of labor provides access to a broader, diverse talent pool;
- Taxation: certain EU countries offer VAT exemptions for cryptocurrency transactions. Additionally, corporate tax rates in the EU are more favorable than those in the US.
Time, Expenses, Complexity of Launching Crypto Business
Embarking on a cryptocurrency project in the European Union (EU) versus the United States involves varying timelines, intricacies, and financial considerations.
The European Union. Depending on the specific EU jurisdiction, the approval process can be expedited. For example, nations like Lithuania, Poland, and the Czech Republic are recognized for their streamlined procedures, allowing for crypto-specific licenses to be granted within a span of 1 to 2 months.
The United States (US). In contrast, the US often presents lengthier timelines, frequently extending from 6 to 12 months. This extended duration primarily results from the strict regulatory prerequisites, especially at the state level. Notably, obtaining a BitLicense in states like New York can consume a significant amount of time.
The European Union. Generally, costs in the EU are lower, particularly in regions with more relaxed regulatory frameworks. Several EU countries offer cost advantages through a lower cost of living, reduced corporate taxes, and more economical labor costs.
The United States (US). Operating in the US often entails higher expenses due to stringent regulatory standards, elevated legal fees, and the necessity for extensive documentation and compliance efforts. Additionally, the procurement of specific licenses like the BitLicense can further inflate the overall costs.
The European Union. The EU’s regulatory framework tends to be more flexible, varying depending on the member state. This leniency can facilitate a smoother initiation process for crypto ventures.
The United States (US). Conversely, the US operates under a more rigorous regulatory environment. The complexity arises from federal laws and the patchwork of state-specific regulations, adding intricacy to compliance requirements and rendering the overall process more challenging.
Top Destinations for Cryptocurrency Business
As a leading European hub for cryptocurrency businesses, Lithuania stands out thanks to its straightforward licensing process and forward-thinking regulations aligning with the MiCA Directive. To establish your venture, you’ll need to meet the €125,000 authorized capital requirement, with a convenient option for installment payments that commence with a 35% down payment.
- Corporate income tax: 5-15%
- Tax on dividends: 15%
Renowned for its swift and efficient crypto licensing procedure, Estonia offers licenses with EU-wide applicability, providing a prime environment for cryptocurrency businesses. Cryptocurrencies enjoy legal parity with fiat currencies, which ensures exceptional regulatory clarity. Additionally, Estonia boasts a low-tax regime, further enhancing the appeal of this jurisdiction.
- Corporate income tax: 19%
- Tax on dividends: 15%
Recently, Poland introduced comprehensive virtual asset regulations, necessitating company registration in the state crypto register. The registration process is straightforward and expeditious. Moreover, Poland’s extensive network of tax treaties with 84 countries creates a tax-advantageous landscape for cryptocurrency enterprises.
- Corporate income tax: 9-19%
- Tax on dividends: 9-19%
While the Czech Republic doesn’t possess specific cryptocurrency licensing, it mandates registration within the Trade Licensing Registry for legitimate operations across the EU. Remarkably, corporate account requirements are waived, and the minimum capital per shareholder is just 1 CZK. This ease of entry enhances the country’s attractiveness for cryptocurrency ventures.
- Corporate income tax: 0%
- Tax on dividends: 25%
How to Start Crypto Business in Europe?
1. Research and Plan
Thoroughly analyze the crypto market landscape. Craft a comprehensive business plan that outlines your objectives, target audience, revenue model, and strategies for growth. Also, carefully select the EU member state where you intend to secure your license, taking into consideration the above-mentioned factors.
Establish relationships with EU-based banks to facilitate fiat currency operations. Develop robust Anti-Money Laundering (AML) and Know Your Customer (KYC) procedures that align with EU regulatory standards. Invest in the creation or acquisition of a secure white-label technology infrastructure, encompassing components like a cryptocurrency trading platform, crypto wallets, crypto OTC desks. Ensure strict compliance with EU data protection regulations (GDPR).
3. Understand Taxes
Collaborate with tax professionals to gain a profound understanding of and compliance with EU tax regulations, including Value Added Tax (VAT) and capital gains tax. Develop a coherent tax reporting and payment strategy. Implement effective accounting and financial reporting practices that adhere to EU standards. Consider engaging a local accountant or firm with expertise in EU accounting rules.
4. Introduce Security
Prioritize the security of user funds and data. Conduct routine security audits and penetration testing to identify vulnerabilities. Engage cybersecurity experts to fortify defenses against potential threats. Formulate robust risk management strategies to mitigate the impact of cryptocurrency price volatility and market risks. Evaluate the option of obtaining insurance coverage to safeguard against unforeseen losses.
5. Develop Strategy
Deliver exceptional customer support in the local language(s) of your target market. Formulate a marketing strategy tailored to your target audience, leveraging local marketing channels, social media platforms, and strategic partnerships.
Upon securing the necessary regulatory approvals and licenses, proceed to launch your crypto project. Continuously monitor and adapt to changes in the regulatory landscape and market conditions.
White Label Solutions
Launching a cryptocurrency project is a multifaceted endeavor, laden with intricate regulatory, financial, and technical considerations. These challenges can vary significantly by jurisdiction, with the European Union often perceived as advantageous due to its clear regulatory environment and cost-efficiency.
To address the complexities outlined above, it may be prudent to consider specialized providers that can help navigate these challenges. Merkeleon offers a comprehensive solution. With a track record dating back to 2014, the company provides white-label cryptocurrency exchange and wallet software solutions, tailored for users of any level.