It's 2025 already, where should crypto companies apply for licenses?

After more than a decade of rapid, unregulated growth, the crypto industry has entered a new era: Without a license, it's virtually impossible to operate. From exchanges, wallets, and payment companies to OTC, custody, staking, and NFT platforms, anything involving the collection, transfer, custody, or matching of virtual assets is essentially regulated under the "VASP (Virtual Asset Service Provider)" framework. This isn't a trend, it's a reality. In major jurisdictions such as the EU, Hong Kong, the UAE, Singapore, and the Bahamas, regulators are simultaneously exerting their efforts, and crypto businesses are moving from a gray area towards institutionalization. If before it was "issuing tokens first and running," now it's "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 license for crypto companies. It is issued by financial regulatory agencies (central banks, financial authorities, securities regulators, etc.) in various countries to manage activities across the entire value chain, from exchanges and wallets to payments and 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-Terrorist Financing) standards; You can legally promote your business, attract users, and provide exchange and custody services; You can connect with traditional financial systems such as banks, insurance companies, and payment providers, gaining cooperation and trust. Companies without a VASP license not only cannot legally reach local customers, but may also face fines, frozen accounts, or even forced shutdowns for operating without a license. In short, a VASP license has become a passport and a shield for crypto businesses. What are the practical benefits of obtaining a license? Many entrepreneurs treat VASPs as a "cost center," ignoring the fact that it is actually a competitive barrier. Legalization is not only a compliance issue, but also a business issue. 1. Global Market Access (Passport Effect) Obtaining a license from an EU member state allows access to the entire European market with a "MiCA passport"; licenses in the UAE, Hong Kong, or Singapore also mean access to mainstream banks, payment and investment institutions. 2. Brand and Trust Endorsement A license is the most effective credential of trust. Banks, insurance companies, venture capital firms, and custodians only want to work with licensed institutions; without a license, even opening an account is difficult. 3. Reduce Legal and Operational Risks Licensed companies operating within the system can effectively isolate money laundering, fraud, and sanctions risks through KYC/AML mechanisms, while simultaneously improving internal governance, transaction security, and compliance review capabilities. Which businesses must hold a VASP license? Almost all B2B or B2C businesses that "touch cryptocurrency" can be defined as VASPs: Most jurisdictions require exchanges, custodian wallets, crypto payment providers, OTC platforms, funds, issuers, payment gateways, etc., to obtain VASP or equivalent licenses. Whether this is required depends on local law. Comparison of VASP Licenses in Major Global Jurisdictions (I) No Mandatory Licenses or Regulatory Gray Areas (Low-Threshold Establishment) For startups, structured companies, or entities only involved in on-chain technology services, some jurisdictions are still in the stage of "no specific VASP law" or "only requiring general anti-money laundering registration." These regions have short establishment cycles and low costs, but cannot provide complete regulatory endorsement and cannot directly serve the mainstream market. Costa Rica: No specific encryption laws exist; companies are only required to comply with general AML/CFT obligations. The setup process takes approximately 1–6 weeks and can be quickly initiated. Suitable for establishing technology development companies or international settlement layer entities. Disadvantages include: lack of regulatory license support and difficulty in obtaining bank accounts. Panama: Has long maintained a state of "no VASP regulation." Financial regulators (SBP, SMV) have publicly stated that they have no regulatory authority over pure crypto trading. Company setup costs are low, there are no minimum capital requirements, and overseas crypto earnings are tax-free under local tax regimes. However, this also means a regulatory vacuum: companies must handle KYC, tax, and business compliance themselves. Suitable for registering holding companies, cross-border settlement SPVs, and DAO foundation holding layers. Belize (Belize) lacks an independent VASP framework and currently only implements AML supervision for "financial institutions." Registration takes approximately 3–5 weeks, is low-cost, and tax-neutral. However, the banking system is not friendly to the crypto industry, and opening an account is difficult. It is suitable for on-chain service projects without listed tokens or cryptocurrency settlement. Crypto is legally recognized as an "asset," but there is currently no specific VASP licensing system. Companies can register as ordinary commercial entities and only need to fulfill general AML/KYC requirements. Local electricity prices are low and digital infrastructure is excellent, making it a common location for mining, computing power, and node service companies. Marshall Islands is open to DAOs and blockchain companies, and does not require a specific VASP license. The government recognizes the "DAO LLC" form, which allows for on-chain company registration. It is suitable for DAO governance layers, on-chain organization registration, or token issuance SPVs. However, a self-developed AML policy is still necessary to prevent obstacles to cross-border cooperation. (ii) Moderate Regulation (Clear but Flexible) El Salvador (The world's first country to recognize Bitcoin as legal tender) There are two types of licenses: BSP (Bitcoin Service Provider): for BTC services; DASP (Digital Asset Service Provider): for other tokens. Currently, Chivo Wallet, Strike, and others are licensed. Cayman Islands has a dedicated VASP Act, requiring the submission of a business plan, AML policy, audit, and management background checks. The process is rigorous yet efficient, low-cost, and tax-neutral, making it suitable for international projects (BitMart is registered here). British Virgin Islands (BVI) is regulated by the FSC and follows the VASP Act. The regulatory focus is on AML/KYC consistency. Portofino Technologies received approval last year. Advantages: Clear regulation, good reputation, easy to expand later. Seychelles: VASP law covers exchanges, wallets, brokerages, and ICO/NFT registration. Significant tax advantages, but higher initial costs, suitable for well-funded projects targeting institutions. Bahamas: Regulated by the SCB, licensed under the DARE Act. Physical office space, capital, and an AML system are required. However, its tax neutrality and strong infrastructure have already attracted companies like Tether, Bitfinex, and OKX to establish operations there. (III) High Regulation (EU System) If the Cayman Islands and BVI represent "flexible compliance," then the EU represents the regulatory system with the clearest rules and the highest barriers to entry. Any company planning to operate within the EU or provide crypto services to EU users must comply with the soon-to-be-fully-implemented MiCA (Markets in Crypto-Assets). The core logic of MiCA is: "All Virtual Asset Service Providers (VASPs) are brought under unified regulation, and obtaining a license in one country allows operation throughout Europe." This means that as long as you obtain a VASP license in any member state, you can cover the entire EU market with your "EU Passport Right." This is the only licensing mechanism in the global crypto regulatory system with cross-border validity. Regulatory Characteristics: MiCA integrates the crypto regulations of its member countries, covering all business models including issuance, trading, custody, exchange, payment, and investment advisory services. Mandatory AML/KYC Requirements: All VASPs must comply with the identification, risk control, and reporting obligations under the EU Anti-Money Laundering Directive (AMLD5/6); The "Travel Rule" system requires that the identities of both parties in a transaction be traceable; Passport advantages allow for compliant operation in 27 member states with a license from one country, greatly improving market access efficiency. While the application cost and compliance burden of an EU VASP license are indeed higher—it offers the most valuable global access. For teams looking to serve European clients or seek long-term brand and institutional partnerships, the MiCA framework is a worthwhile, heavily regulated approach. Choosing which jurisdiction to apply for a VASP license in is not simply a matter of "whichever is cheapest," but a comprehensive decision concerning market access, regulatory acceptance, and long-term sustainability. In practice, you can judge from three dimensions: (I) Market Dimension: Where your customers are, that's where the regulation is. VASP licenses from different jurisdictions are not all freely usable across borders. You must be clear about: Who your target users are, in which region your main customer base is located, and whether your business involves fiat currency deposits and withdrawals. If your clients are primarily located in the EU or the UK, you should choose a member state under the MiCA framework; if targeting Asian users, Hong Kong, Singapore, or the UAE are easier to establish a presence in; if you wish to establish an international holding or settlement center, BVI, Cayman Islands, and Bahamas offer tax and structural advantages. The actual "jurisdiction" of regulators is often based on the location of the customers rather than the company's registered location—meaning you cannot circumvent the regulations of major markets by registering in a less restrictive region. Practical advice: First, draw up your funding and user flow map, then decide where the license will be issued. (II) Regulatory Dimension: Clear rules are more valuable than "relaxed" regulations. While setting up in low-threshold regions is quick, it is often rejected by banks and partners later due to regulatory ambiguity. In contrast, a jurisdiction with a stable regulatory framework and transparent approval standards can actually enhance brand reputation and subsequent expansion efficiency. Focus on three key issues: 1. Regulatory Maturity: Are there specific VASP laws (such as the Cayman VASP Act, BVI VASP Act, EU MiCA)? 2. Compliance Requirements: Are there requirements for AML policies, compliance officers, local personnel, and physical office presence? 3. Ongoing Regulatory Intensity: After obtaining a license, is it necessary to regularly submit audit reports, update KYC reports, and maintain minimum capital? Clear regulation ≠ stringent. 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 the most lenient regulations. (III) Financial Dimension: Cost ≠ Application Fee, but Long-Term Compliance Costs. Many teams mistakenly believe that the cost of obtaining a license only includes application and legal fees. In reality, the real cost is ongoing compliance and local maintenance. Key cost elements include: Initial setup costs: registration fees, legal fees, compliance advisor fees; Ongoing compliance costs: annual audits, AML reports, compliance officer compensation, local leases; Tax environment: whether taxes apply. Neutral, whether withholding tax exists, and whether double taxation can be avoided; Banking support: Can an operating account be easily opened and access to fiat currency channels be established? Some jurisdictions may have low initial costs, but their operations are hindered later due to "inability to obtain bank support"; conversely, jurisdictions with mature regulations may have higher costs, but they can gain financial cooperation and capital trust. Practical advice: Consider the total cost from the four stages of "license acquisition - operation - financing - exit", rather than just looking at the moment of obtaining the license. Summary: Choosing a license isn't about finding the cheapest one, but about finding the most suitable ecosystem. An ideal legal domain = clear regulation × controllable costs × access to the target market × willingness of banks to cooperate. A VASP license is not just an "entry permit," but a fundamental requirement for your future stability and long-term success. VASP: More Than Just a License, a Moat In the past, crypto companies obtained licenses to "survive"; after 2025, licensed companies will receive the key to the financial system. The VASP license is not merely a regulatory requirement; it is becoming a new international financial language—banks, payment institutions, funds, and family offices all use it to determine if you are "worth cooperating with." The future of the crypto world will not be a golden age of unlicensed operation, but a new era of compliant operation, cross-border trust, and institutional alignment. Projects that complete their licensing arrangements and streamline their organizational structure and compliance systems ahead of time will reap the real competitive benefits in the next wave of policy developments. Compliance is not a burden, but a barrier. Whoever builds their competitive advantage first will define the future market order.