A cryptocurrency exchange is a service that allows clients to trade virtual currencies either for other types of digital currencies or for conventional, fiat money. The exchange is part of the services required by individuals who deal in cryptocurrencies, along with the wallet service that allows them to store their digital currencies.
Investors who are interested in exploring the cryptocurrency field can open an Isle of Man cryptocurrency exchange.
| Quick Facts | |
|---|---|
| Cryptocurrency seen as legal tender (Yes/No) |
No |
|
Local regulatory agency in the |
The Isle of Man Financial Services Authority (FSA) |
|
Business licence needed to open a cryptocurrency company |
Issued upon registration, as for all businesses |
| Companies need to obtain a cryptocurrency license |
Not per se, registration with the FSA |
| Cryptocurrency exchange activities in Isle of Man | Buying and selling cryptocurrency, trading, storing fiat currency for cryptocurrency purchase purposes |
| Anti-money laundering rules followed by an Isle of Man cryptocurrency exchange |
Compliance with the AML/CTF requirements is needed |
| Special requirements for investors who open a cryptocurrency company | None other than those for registration with the FSA and compliance with the relevant law (for those involved with assets)
|
| Residency requirements for investors | No |
| Types of companies used by those who open a cryptocurrency company in the Isle of Man |
Public or private company |
| Minimum capital for a cryptocurrency company |
No prescribed minimum |
| Minimum number of shareholders | 1 |
| Minimum number of directors | 2 directors |
| Other mandatory requirements | 1 company secretary, registered office in the Isle of Man |
| Company taxation in the Isle of Man | 0% corporate income tax for activities other than banking business |
| Reasons to open a cryptocurrency company in Isle of Man |
Good tax and regulatory regime, secure data centers, generally good conditions and costs for running the business |
The company can provide solutions, in the form of an app or service, for the purchase, sale, and use of digital currencies. In addition to this, the company can develop other products in time, such as the aforementioned wallet.
In this article, our team of Isle of Man company formation agents discusses solely the opening of a cryptocurrency exchange and the need to obtain a cryptocurrency license in the Isle of Man.
We invite investors who need more information, or additional details, to reach out to our agents if they have more questions about how to open a cryptocurrency company in the Isle of Man.
Table of Contents
The crypto exchange
A cryptocurrency exchange service will offer the needed services to buy and sell Bitcoin and other cryptocurrencies. These can be exchanged with one another, for example, Bitcoin for Litecoin or regular currencies can be exchanged for cryptocurrencies.
There is no special need to obtain a cryptocurrency license for opening this type of exchange, other than registration with the Financial Services Authority.
Investors who start a cryptocurrency exchange will need to have a business and a marketing plan. These types of services are offered online and via a mobile app that allows its users to make the exchange as quickly as possible. Hiring a talented team of software programmers and user experience designers will be an important step when developing the product.
When using a cryptocurrency exchange, clients will expect instant buys and a mobile app that is optimized according to their device of choice so that they can carry their preferred digital currencies and/or fiat currencies as desired.
Preparing the business plan and developing the product will thus be important steps and will take place before the actual Isle of Man company registration.
How to open a cryptocurrency company in the Isle of Man
Company formation in the Isle of Man is a straightforward process that can be completed in approximately 48 hours or faster, in two hours or less, for investors who agree to pay a special fee for an expedited registration.
Investors who open a crypto company in the Isle of Man will need to comply with the following:
- Choose a company name: the name of the new company needs to be unique and acceptable;
- Have a registered address and agent: companies need to have a registered address based in the Isle of Man and a licensed registered agent;
- Register the business: this is done with the Companies Registry once the form for registration and the accompanying documents are submitted (complete with proof of payment for the needed fees);
- Bank account: opening a corporate bank account can take place with the help of our company formation experts after the business is registered.
The payment of the registration fee is made by cash, card or cheque, not by bank transfer.
The fast incorporation procedure is possible when the applicant submits the registration documents before 2:30 pm or 4 pm on a business day.
All documents are checked for consistency and correctness. Incomplete submissions are rejected by the Companies Registry and this may result in additional or late fees for the applicant.
Although there is no need to obtain a cryptocurrency license per se, other than registration with the FSA, investors should also consider the time needed to obtain this approval.
Once they open the company, investors may also be interested in intellectual property protection. Our team can give you details about the services we offer for this purpose.
We invite you to watch a short video on the characteristics of the crypto exchange:
Crypto company taxation in the Isle of Man
An important issue to take into account by investors who open a cryptocurrency company in the Isle of Man is the taxation of the legal entity.
The Isle of Man is an ideal location for businesses in this field, and in many other fields, given the fact that it has a 0% corporate income tax for almost all types of trade.
A cryptocurrency company falls under the scope of the zero-corporate tax policy, thus creating a very important advantage for investors.
Moreover, the Isle of Man does not impose a withholding tax on dividends. There is no capital duty and no payroll tax.
VAT registration is mandatory for companies with a taxable income that exceeds GBP 85,000 per year. Registration as an intending trader is possible in some cases.
Our team can give you more information on the taxes applicable to crypto companies, as well as information about tax compliance.
When running a cryptocurrency exchange, the founders will enjoy the local tax-neutral regime, however, they will also need to be mindful of the fact that, although companies are exempt from complicated financial reporting, they do need to keep accurate records. Our accountants in the Isle of Man can give you more details and provide services upon request.
Regulations for cryptocurrency companies in the Isle of Man
Cryptocurrency companies in the Isle of Man operate under a set of criteria that have to do with the number of resident directors and the manner in which the company is controlled.
These regulations are designed to allow for better control of legal entities operating in this field, control exercised by the Isle of Man Financial Services Authority.
Companies involved in cryptocurrency activities, such as the transferring, transmitting, exchanging or providing safe custody or storage for convertible virtual currencies are required to register with the Isle of Man Financial Services Authority (IOMFSA).
Usually, the regulations for cryptocurrency companies require that these types of businesses have at least two resident directors and they must be managed and controlled from the Isle.
However, in light of the travel restrictions that were in place, the authorities have allowed investors to register these types of businesses without the need of an immediate presence.
Nonetheless, the registration of a crypto business is also subject to other considerations. Investors who wish to open a cryptocurrency company in the Isle of Man can reach out to our team for details.
The local regulations describe four types of currencies:
- digital currency: the electronic version of a fiat currency; can include representations of virtual currency;
- virtual currency: the digital representation of a value that may be traded digitally; is not centrally controlled or administered;
- convertible virtual currency: this category includes cryptocurrencies that can be converted into fiat currencies through a cryptocurrency exchange.
- non-convertible virtual currency: it cannot be transferred to another individual and cannot be concerted or redeemed for fiat currency through an exchange.
All companies carrying out a regulated activity in this business sector in the Isle of Man fall under the scope of the Anti-Money Laundering and Countering the Financing of Terrorism Code 2019 (AML).
Some types of tokens, albeit limited, may not be subject to regulation.
For example, when the token only offers the client access to services (current or future) it is not usually subject to regulation. However, when it offers a right to income or the right to buy or concert, it is considered an investment and regulated as a result.
The regulatory perimeter for tokens can be different, based on whether they are considered to be an investment, e-money, or an unregulated token (a case in which AML implications can still apply).
Our Isle of Man company registration specialists can also provide investors with detailed information about the relevant regulations once they choose to incorporate the exchange in this jurisdiction.
Isle of Man company formation statistics
The Isle of Man is among the top locations for company formation in Europe, mainly due to its favorable taxation policies. It is also one of the countries that are working on developing an advantageous cryptocurrency regulation.
The statistics below, offered by the Government, highlight the evolution of the number of companies in 2019:
- the total number of companies incorporated in Q1 2019: 205 1931 Act Companies and 173 2006 Act Companies.
- the number of companies incorporated in Q2: 171 1931 Act Companies and 203 2006 Act Companies.
- companies incorporated at the end of Q3: 201 1931 Act Companies and 173 2006 Act Companies.
At the end of Q3, there were 7 registered foreign companies.
The different statistics refer to companies that have been incorporated as per the 1931 Companies Act and the 2006 Companies Act. The distinction is a relevant one as the newer act introduced a number of important provisions that increased the attractiveness of the jurisdiction.
Investors who open a cryptocurrency company in the Isle of Man register these as per the 2006 Isle of Man Companies Act.
For more information on how to open a company here, please contact our Isle of Man company registration agents.