The process of securing approval for a crypto business in the U.S. is lengthy and complicated. Even minor errors can lead to delays, additional expenses, or issues with compliance. Unfortunately, the requirements may evolve depending on the services you provide, your customers, and your geographical location.
The first step of a good plan is before the filing of an application. It is important that businesses are aware of their regulatory responsibilities, create accurate documentation, and establish compliance systems early. To prevent common pitfalls, the crypto licensing process can be made easier if done properly.
Understand Your Business Model First
One common mistake is choosing a license before defining the business clearly. First, write down all of the services your business will provide. These can involve crypto exchange or custody services, payments, transfers, issuing of tokens, or investment advice.
The regulatory treatment may be based on the business activities of the company. The regulatory treatment can depend on what the company actually does. Certain virtual currency exchangers and administrators may qualify as money transmitters.
When there is a clear business model, the licensing analysis can be more accurate.
Do Not Focus on Only One Regulator
Another mistake is assuming there is one universal U.S. crypto license. Different activities can involve different regulators. Federal requirements may apply alongside state-level rules. Many states have their own licensing requirements for money transmission or virtual currency activities.
Prior to applying, make a regulatory map. Identify which services are offered and which states are served, and which agencies might have jurisdiction over the services.
Avoid Treating Compliance as an Afterthought
Some companies begin the US crypto licensing application before they even create their compliance program. This can pose an issue later on. Regulators may expect a business to have clear policies and controls that match its operations.
Plan ahead for important aspects. They can range from AML procedures through to KYC controls, transaction monitoring, customer identification, recordkeeping and reporting processes.
Submit Complete and Consistent Information
Any application that is not complete can delay the review process. Check all documents thoroughly before submitting them. Make sure company details, ownership information, financial records, business descriptions, and compliance policies tell the same story.
Do not overlook small differences. Inconsistent information about services or outdated addresses may result in more questions. Prepare a document checklist prior to filing.
Afterward, ask a seasoned compliance or legal expert to review the application as a regulator. A clean application is easier to understand and easier to evaluate.
Do Not Underestimate State Requirements
If a company provides its service to customers across various states, it can be required to have a license in each of the states. Requirements may vary from jurisdiction to jurisdiction. There are certain states that have specific regulations for digital asset activities, and others that could be subject to existing money transmission laws.
Do not assume that approval in one state automatically covers every other market. Determine the customer’s location, the services that will be provided, and if licensing, registration, or an exemption applies.