Across the world we know that there are some areas far more digitalized than some other countries.
Estonian e-residency and Georgian tech companies come to my mind. Also UK has started to define rules for cryptocurrency activities.
How far can this kind of crypto-friendly jurisdiction go, and how far are they going to create obstacles?
Crypto-related business in UK now must be regulated by FCA. Of course you have a fee to get regulated, plus you have the hourly fee of the lawyers and accountants to file the correct data. Yes, you are subject to regulation, but the amount of documents are kind of tough to be made even from a willing entrepreneur.
If you consider that a regular lawyer in UK usually take no less than 350?/hour, you can bet that the FCA fee will be the last problem.
Here is the list of documents for FCA regulation for crypto-assets companies. This regulation is compulsory from the 10th of this year and must be obtained before the beginning of the crypto-business.
- Programme of operations: setting out the specific cryptoasset activities for the business.
- Business Plan: setting out the business objectives, customers, employees, governance, plans and projections. It should provide enough detail to show that the proposal has been carefully thought through and that the adequacy of financial and non-financial resources has been considered. It should also include details on the volume and value of transactions, number and type of clients, pricing and the main lines of income and expenses.
- Marketing plan: including a description of customers and distribution channels.
- Structural organisation
- Systems and controls: provide details of the key IT systems you will use to run the business, including details of IT security policies and procedures.
- Individuals, beneficial owners and close links
- Governance arrangements and internal control mechanisms
- Anti-Money Laundering/Counter Terrorist Finance framework and risk assessment
- Business-wide risk assessment: with monitoring and mitigation policy.
- All cryptoassset public keys/wallet addresses:
- Customer on-boarding agreements and process.
- Customer due diligence and enhanced due diligence procedures, meeting the minimum standards required in the regulations.
- Transaction monitoring procedures.
- Record-keeping and recording procedures.
- Business continuity plan.
- Outsourcing arrangements policy and service license agreements.
- Budget forecasts and financials for the first three financial years.
- Money Laundering Reporting Individual forms for all directors, executives and officers.
- Beneficial Owner forms for shareholders.
Source: https://www.fca.org.uk/cryptoassets-aml-ctf-regime/register#Contact
I am not saying that these procedures are wrong, and the most part of them must be accomplished anyway, in any jurisdiction.
But let me guess: how many lawyer/accountancy hours should be counted to pursue all the documents? Let’s say at least 30.
30x350? = 10.500?. In a very optimistic scenario.
Very optimistic.
Plus there will be expenses for the KYC/AML service provider, costs for courses to train the staff or to hire already prepared staff.
Costs will be around at least 20k? to set up everything in the correct way. Well wait. The FCA fee is just 2k? if you are going to create a business with an expected business volume lower than 250k?.
FCA fee will be 10.000? if the expected business volume is higher than 250.000?.
Do you see why the FCA fee will be your last problem when starting a crypto company in UK?
And what about Estonia, the first country defined “crypto-friendly”?
Formally the licence is 3300€, but then you will need to hire a local director and a local officer, train them and wage them.
Result?
30.000€ the first year and some kind of 25.000€ the following years.
I want to be crystal clear.
I am not contrary to cryptocurrencies regulation. I just think that decades of euros are far way too much “just to get regulated”. I would prefer a thinner protocol, with definite parameters on taxation, accounting, anti-money laundering and so on.
In this trial of deep regulation of the matter, I see the same risks we have in Italy: since the taxation is too high, people may think to invest money to learn how to avoid it. With a lighter taxation, everyone would be happier to pay taxes.
Where is the real boundary between complication, excessive regulation, transparency and lightness of the law-system?
