The Czech legal framework is harmonized with the EU 4th AML Directive and it sets a number of requirements for crypto companies in the Czech Republic. The amended legislation encompasses a wide variety of crypto-related operations, as it refers to those organizations that sell/buy, maintain or administer cryptocoins or offer other services associated with digital assets.
From AML perspective, cryptocoins are deemed as digital units that are not included in the category of government-issued money but are accepted as a form of payment for goods and services. Each Czech crypto company is subject to these laws in terms of AML/CFT:
- Law on Combating Money Laundering (Law No 253/2008),
- Money Laundering Ordinance (Decree No 281/2008),
- Criminal Code (Law No. 40/2009),
- Law on International Sanctions (Law No. 69/2006).
Under the law, businesses planning to carry out their crypto activity in Czechia must acquire a license. It permits operation within the EU, including the establishment of offices in any EU member state without having to tackle red tape, provided that they inform domestic authorities on that.
Holders of EU/EEA crypto licenses are not obliged to acquire a Czech license. Instead, they could inform the Czech authority by submitting them with a passport.
If the crypto company operates without legal permission, it risks being deemed engaged in fraud activities, which is subject to imposing fines of up to 500,000 CZK and being forced to close.
Under requirements, setting up the Czech physical presence of an entity is mandatory. The company may be formed as an LLC – one of the most widely used legal business forms because of the following benefits: low minimum equity requirements, a small number of owners, and the possibility to be exempt from financial audits. Generally, the process of incorporation is completed within 3 weeks, provided that all obligatory papers are provided to the regulator in due course.
Main requirements for Czech crypto companies
An applicant is obliged to satisfy the following obligations:
- Draw up a business plan unveiling the business model and details of the financial projections;
- Establish an office in the country;
- Employ employees, with a minimum of 2 directors with sufficient educational and professional expertise and with clear criminal records;
- Prepare internal control systems, alongside AML policy to guarantee detection and prevention of fraudulent activities;
- Appoint an AML officer to keep in line with the legislation;
- Detail hardware and software applied for the intended activities;
- Draw up policies and procedures that guarantee the security of client funds, their information, etc.
Once a crypto company has obtained a permission, a licensee must regularly report to the regulator on its operation.
Reporting obligations
The activity of crypto businesses must be in line with the International Financial Reporting Standards (IFRS). In accordance with it, annual financial statements must contain a balance sheet and income statements. They must be filed along with the tax return.
In terms of auditory rules, the businesses must be audited if they meet at least two of the following parameters:
- Turnover is over 80 million CZK;
- Total assets are over 40 million CZK;
- The average number of employees is at least 50.
For other details of requirements for crypto companies in Czech Republic, please contact us. Reach out to our professionals and discover the services we provide.
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