Author: Lawyer Liu Honglin
After more than a decade of wild growth, the cryptocurrency industry has entered a new era: Without a license, it is difficult to make any progress.
From exchanges, wallets, and payment companies to OTC, custody, staking, and NFT platforms, as long as it involves the receipt, transfer, custody, or matching of virtual assets, it is basically regulated under the "VASP (Virtual Asset Service Provider)" framework. This is not a trend, but a reality.
In major jurisdictions such as the European Union, Hong Kong, the UAE, Singapore, and the Bahamas, regulators are synchronously ramping up efforts, and cryptocurrency businesses are moving from a gray area to institutionalization. If it was previously "issue coins and run," now it is "compliance first."
What is a VASP license? Why is it becoming increasingly important?
A VASP (Virtual Asset Service Provider) license is essentially a financial business permit for cryptocurrency companies. It is issued by the financial regulatory authorities of various countries (central banks, financial management bureaus, securities regulatory commissions, etc.) to manage the full chain of activities from exchanges, wallets, and payments to investment services.
Holding a VASP license means:
Your business complies with the jurisdiction's AML (Anti-Money Laundering), KYC (Know Your Customer), and CTF (Counter-Terrorism Financing) standards;
You can legally promote your business, attract users, and conduct exchange and custody services;
You can connect with traditional financial systems such as banks, insurance, and payments, gaining cooperation and trust.
Companies without a VASP license not only cannot legally reach local customers but may also face fines, account freezes, or even forced shutdowns for "operating without a license."
In short, the VASP license has become a passport and a protective talisman for cryptocurrency companies.
What are the practical benefits of obtaining a license?
Many entrepreneurs view VASP as a "cost center," overlooking that it is actually a competitive barrier. Legalization is not just a compliance issue but also a business issue.
1. Global Market Access (Passport Effect)
Obtaining a license from an EU member state allows you to operate across the entire European market with a "MiCA passport"; being licensed in the UAE, Hong Kong, or Singapore also means you can connect with mainstream banks, payment, and investment institutions.
2. Brand and Trust Endorsement
A license is the most effective proof of trust. Banks, insurance companies, VCs, and custody institutions are only willing to cooperate with licensed entities; without a license, even opening an account is difficult.
3. Reduced Legal and Operational Risks
Licensed companies operate within a system that can effectively isolate money laundering, fraud, and sanction risks through KYC/AML mechanisms, while also enhancing internal governance, transaction security, and compliance review capabilities.
Which businesses must hold a VASP license?
Almost all B-end or C-end businesses that "touch coins" may be defined as VASP:
Most jurisdictions require exchanges, custody wallets, crypto payments, OTC, funds, issuers, payment gateways, etc., to obtain VASP or equivalent licenses, whether a license is needed depends on local law.
Comparison of VASP Licenses in Major Global Jurisdictions
(1) No Mandatory License or Regulatory Gray Area (Low Threshold for Establishment)
For startup projects, structural companies, or entities that only involve on-chain technical services, some jurisdictions are still in the stage of "no specific VASP law" or "only requiring general AML registration." These regions have short establishment cycles and low costs but cannot provide complete regulatory backing and cannot directly serve the mainstream market.
Costa Rica
No specific cryptocurrency law, only requires companies to comply with general AML/CFT obligations. The establishment process takes about 1–6 weeks and can be quickly initiated.
Suitable for establishing technology development companies or international settlement entities.
The downside is: without regulatory license support, it is difficult to obtain a bank account.
Panama
Has long maintained a "no VASP regulation" status. Financial regulatory authorities (SBP, SMV) have publicly stated that they have no regulatory authority over pure cryptocurrency transactions. Company establishment costs are low, with no minimum capital requirements, and under local tax systems, offshore cryptocurrency earnings are tax-exempt.
But this also means a regulatory vacuum: companies must fulfill KYC, tax, and business compliance on their own.
Suitable for registering holding companies, cross-border settlement SPVs, and DAO foundation holding layers.
Belize
No independent VASP framework, currently only implements AML supervision for "financial institutions." Registration takes about 3–5 weeks, costs are low, and tax is neutral.
However, the banking system is not friendly to the cryptocurrency industry, making it difficult to open accounts.
Suitable for on-chain service projects without token issuance or token settlement.
Georgia
Cryptocurrency is legally recognized as "assets," but there is no specific VASP licensing system yet.
Companies can register as ordinary business entities and fulfill general AML/KYC requirements.
Local electricity prices are low, and digital infrastructure is excellent, making it a common establishment location for mining, computing power, and node service companies.
Marshall Islands
Open attitude towards DAOs and blockchain enterprises, with no specific VASP license. The government recognizes the "DAO legal entity (DAO LLC)" form, allowing companies to be registered on-chain.
Suitable for DAO governance layers, on-chain organization registration, or token issuance SPVs.
However, it is still necessary to establish AML policies to prevent cross-border cooperation from being hindered.
(2) Moderate Regulation (Clear but Flexible)
El Salvador
The first country in the world to recognize Bitcoin as legal tender. It has two types of licenses:
BSP (Bitcoin Service Provider): for BTC business;
DASP (Digital Asset Service Provider): for other tokens.
Currently, Chivo Wallet, Strike, etc., are all licensed.
Cayman Islands
Has a specific "VASP Act," requiring the submission of a business plan, AML policy, audit, and management background checks. The process is rigorous but efficient, with low costs and a neutral tax system, suitable for international projects (BitMart is registered here).
British Virgin Islands (BVI)
The regulatory authority is FSC, following the "VASP Act." The regulatory focus is on AML/KYC consistency. Last year, a project, Portofino Technologies, was approved.
Advantages: clear regulation, good reputation, and easy subsequent expansion.
Seychelles
The VASP Act covers exchanges, wallets, brokers, and ICO/NFT registration.
Tax incentives are significant, but initial costs are relatively high, suitable for well-funded, institution-oriented projects.
Bahamas
Regulated by SCB, licenses are issued under the "DARE Act." Requires physical office, capital, and AML systems.
However, it has a neutral tax system and strong infrastructure, attracting Tether, Bitfinex, OKX, and others to establish operations.
(3) High Regulation (EU System)
If the Cayman Islands and BVI represent "flexible compliance," then the EU has the clearest rules and the highest thresholds for regulatory systems. Any business planning to operate within the EU or provide cryptocurrency services to EU users must comply with the soon-to-be-fully-effective "MiCA" (Markets in Crypto-Assets, EU Crypto Asset Market Regulation).
The core logic of MiCA is:
"All virtual asset service providers (VASPs) are subject to unified regulation, and obtaining a license in one jurisdiction allows operation across the entire EU."
This means that as long as you obtain a VASP license in any member state, you can cover the entire EU market with the "EU Passport Right." This is the only license mechanism with cross-border effectiveness in the global cryptocurrency regulatory system.
Regulatory Characteristics
Unified regulatory standards: MiCA integrates the cryptocurrency regulations of member states, covering all business forms including issuance, trading, custody, exchange, payment, and investment advisory;
Mandatory AML/KYC requirements: All VASPs must implement identity verification, risk control, and reporting obligations under the EU's "Anti-Money Laundering Directive" (AMLD5/6) framework;
"Travel Rule" system: requires the identities of both parties in a transaction to be traceable;
Passport system advantages: holding a license from one country allows compliant operation in 27 member states, greatly enhancing market access efficiency.
The application costs and compliance burdens for the EU VASP license are indeed higher—but it provides the most valuable access rights globally. For teams looking to serve European customers or seeking long-term brand and institutional-level cooperation, the MiCA framework is a worthwhile investment in a heavily regulated route.
Three Major Considerations for Obtaining a License
Choosing which jurisdiction to apply for a VASP license is not simply about "going where it's cheap," but a comprehensive decision regarding market access, regulatory acceptance, and long-term sustainability. Based on experience, it can be judged from three dimensions:
(1) Market Dimension: Where are your customers, the regulation is there
Different jurisdictions' VASP licenses are not all freely usable across borders.
You must clarify: Who are your target users, where is your main customer base, and does your business involve fiat currency inflows and outflows?
If your customers are mainly in the EU or the UK, you need to choose a member state under the MiCA framework;
If targeting Asian users, Hong Kong, Singapore, or the UAE are easier to establish;
If you want to establish an international holding or settlement center, BVI, Cayman, or Bahamas have tax and structural advantages.
The actual "jurisdiction" of regulation is often based on the source of customers rather than the company's registered location—this means you cannot bypass the regulation of major markets by registering in lenient areas.
Practical advice: First, draw your funding and user flow map, then decide where to issue the license.
(2) Regulatory Dimension: Clear rules are more valuable than "leniency"
While establishing in low-threshold areas is quick, it often leads to rejection by banks and partners later due to regulatory ambiguity. In contrast, a jurisdiction with a stable regulatory framework and transparent approval standards can enhance brand credibility and subsequent expansion efficiency.
Focus on three key questions:
Regulatory Maturity: Is there a specific VASP law (e.g., Cayman VASP Act, BVI VASP Act, EU MiCA)?
Compliance Requirements: Are there requirements for AML policies, compliance officers, local personnel, and substantial office presence?
Ongoing Regulatory Intensity: After the license is approved, are there requirements for regular audits, updating KYC reports, and maintaining minimum capital?
Clear regulation ≠ harsh.
It means you can operate stably under clear rules rather than passively adjusting to policy fluctuations.
Practical advice: Prioritize regions with high regulatory transparency rather than those with the most "lenient" regulations.
(3) Financial Dimension: Cost ≠ Application Fee, but Long-term Compliance Expenses
Many teams mistakenly believe that the cost of obtaining a license only includes application and legal fees. In reality, the true cost is ongoing compliance and local maintenance.
Key cost factors include:
Initial establishment costs: registration fees, legal fees, compliance consultant fees;
Ongoing compliance costs: annual audits, AML reports, compliance officer salaries, local leasing;
Tax environment: whether it is tax neutral, whether there are withholding taxes, and whether double taxation can be avoided;
Banking support: whether it is easy to open operational accounts and access fiat currency channels.
Some jurisdictions may have low initial costs, but later face operational obstacles due to "inability to obtain bank support"; conversely, jurisdictions with mature regulations may have higher costs but can lead to financial cooperation and capital trust.
Practical advice: Consider the total cost from the four stages of "licensing—operation—financing—exit," rather than just focusing on the moment of obtaining the license.
Summary:
Choosing a license is not about finding the cheapest option, but about finding the most suitable ecosystem.
Ideal jurisdiction = clear regulation × controllable costs × ability to connect with target markets × willingness of banks to cooperate.
The VASP license is not just an "entry permit," but also a foundational configuration for whether you can move steadily and far in the future.
VASP is not just a license, but a moat
In the past, cryptocurrency companies obtained licenses to "survive"; after 2025, licensed companies will gain the key to the financial system.
The VASP license is not just a regulatory requirement; it is becoming a new international financial language—banks, payment institutions, funds, and family offices all use it to assess whether you are "worth cooperating with."
The future of the cryptocurrency world will not be an era of unlicensed wild running, but a new era of compliant operations, cross-border mutual trust, and institutional connections.
Projects that complete their licensing layout, streamline their structures, and compliance systems in advance will gain true competitive advantages in the next wave of policy changes.
Compliance is not a burden, but a barrier.
Whoever builds the moat first will define the future market order.
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