Labuan is included in the list of the most favorable jurisdictions for running business globally in terms of taxation also for crypto companies. Being a local regulatory agency, the independent regulator of finance branch LFSA continues to provide fit-for-digital business structures to attract various digital financial-related business to the country. Hence, to establish a cryptobusiness in an offshore area, it is compulsory to get Labuan crypto exchange license.
Overview of Crypto Exchange Licensing in Labuan
As a tax-low jurisdiction with a business-friendly regulation, Labuan allows crypto businesses to conduct their services in the country where the entities are registered. Low operating expenses and a status of a fully compliant legal system are the key advantages for many business people working in the field of digital assets.
In 2018, the LFSA involved exchanges to its legal field by covering them by license offerings. As defined, an exchange is a marketplace that delivers to digital asset owners the possibility to list their offerings for investors to contribute or trade in various ways: ‘crypto2crypto’, ‘fiat2crypto’ or vice versa.
This country allows working with overseas markets with a corporate taxation rate of 3% whilst the standard Malaysian corporate taxing rate is 24%. In 2019, Fusang Exchange received its permission from the LFSA, becoming the first Asian completely authorized exchange. The LFSA has taken a number of efforts to regulate digital assets market, thus the business is legal with full AML-TF law compliance.
Main peculiarities of a crypto exchange licensing in Labuan
- Foreigners can establish companies with 100% full ownership;
- 3% corporate taxation rate;
- No government-imposed limitations on the purchase and/or sale of currencies;
- No taxation on interests, management fee, royalties;
- 50% tax abatement for foreigners’ employment; two-year working visa (with the possibility to renew).
Obligations to the license applicants
A Labuan crypto license can be issued only if eligibility criteria are satisfied. These statements include the following types:
- A person or entity with an industry background and a good reputation;
- A crypto exchange or similar services issuer that has an official permit from home authority;
- A licensed entity including legal exchanges under the FSA 2013 with consent from the Central Bank.
Criteria for becoming licensed
- Paid-in capital of at least 10 Million Malaysian Ringgits (approximately 2,250 000 US dollars);
- A registered office;
- Transactions available in multiple currencies;
- Servicing local residents is not bounded;
- If any errors of the systems occur, a business must inform a regulatory agency on that issue and send a report within 2 weeks;
- Nomination of an auditor;
- All negotiations and contracts with clientele and any party must be put on record;
- Adherence to the AML rules and normatives by the Central Bank and LFSA;
- Any replacements as of senior management, office, share holders, branches outside the country must be approved by LFSA;
- A license fee is 40 thousand Malaysian Ringgits per year (close to USD 10 thousand).
Forms needed for a crypto license application
- A business program for three years with its forecast of future revenues and expenses;
- Data about senior management and shareholders;
- Anti-money laundering policies and procedures.
Overall, this process is finished in one-two months.
The lawyers of Eternity Law International can help you open a crypto exchange in Labuan. If you are interesting in working in this jurisdiction, please contact us for further details on getting Labuan crypto exchange license.
Please contact us to get more information.
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