Businesses might find themselves falling behind when it comes to new and developing technology in today's fast-paced world of innovation. In such a setting, rules controlling the use of certain technologies may appear restrictive to companies at first, but they are just aimed to safeguard consumers and organizations from any possible dangers or risks associated with these technologies. Due to the current state of blockchain technology and cryptocurrencies, there may be an element of risk involved, which is why several countries have enacted legislation to oversee their usage. However, although such constraints may appear to limit your options as an individual or organization looking to incorporate blockchain or other crypto aspects into your products or services, in reality, they are there for good reason.
The Czech Republic ranks second in the EU behind Lithuania for the simplicity of acquiring a crypto license. The fundamental characteristic of this country is that crypto assets are regarded as electronic money rather than a means of payment or products.
Cryptocurrency license in the Czech Republic
In the Czech Republic, there is currently no particular crypto license. To conduct crypto-related activities, a corporation must follow normal authorization processes and receive a trade license from the Trade Licensing Register.
The laws of the Czech Republic on cryptocurrencies state that crypto assets in the Czech Republic have the status of "goods" and are not methods of payment. Their circulation is not individually controlled, but it is also not restricted. If crypto-assets resemble financial products such as bonds or shares, they may be subject to the applicable financial regulation. Furthermore, any transactions using virtual currency must fall within the purview of anti-money laundering regulations.
The governor of the National Bank, Miroslav Singer, registered a summary titled "Security of Internet Payments and Cryptocurrency" in April 2015. According to this paper, EU regulations apply to virtual currencies in the absence of restrictions imposed by Czech Republic legislation. Investors who wish to establish a cryptocurrency firm must follow the laws established by the Czech government as well as the criteria of the European Union directive.
The Czech National Bank (CNB) is the primary regulator of the Czech financial market. It regulates local banks and permits them to provide cryptocurrency-related services as long as AML/KYC requirements are followed.
The Czech Republic is appealing for cryptocurrencies and IT activities because of favorable regulations. The Paralelni Polis Center is based in Prague and works on crypto technology development. In 2018, the Czech Republic established a dedicated blockchain alliance, Blockchain Connect / Czech Alliance, whose primary mission is to develop and apply technology in the nation.
The government's backing and funding of such institutions demonstrate the government's interest in the advancement of new financial technology and the protection of state stability.
Different types of Crypto License
Before beginning operations in the Czech Republic, businesses must get a specific authorization Called a license. There is still no well-thought-out regulatory framework in place to regulate digital assets. However, the government has already taken considerable strides in this regard, developing a transparent system for getting permits.
So, based on the sort of activity you want to do, you are offered four types of licenses :
- Classic - fee-based trade of crypto assets;
- Fiat - a commission-based exchange between cryptocurrency and fiat money.
- Traditional - intermediation in all types of the monetary transaction;
- Specialized - cryptography-related products and services. It has a variety of cryptocurrency wallets, tools for encrypting client keys, and much more.
Large crypto exchanges and e-wallets should have a specialized license in order to provide a greater variety of services.
However, if you operate a tiny exchange that converts cryptocurrencies into other crypto assets, you just need a standard license.
As you can see, even if they provide up to four different sorts of rights, selecting the best option will be simple.
If you refuse to get permission, be prepared for the state authorities to label you a fraudster, levy a hefty punishment (up to 20,000 euros), and order you to liquidate your business.
Guidelines for starting a cryptographic company in the Czech Republic
To get one of the four licenses, a cryptography firm must be registered in the Czech Republic. Due to benefits such as low minimum equity requirements, a limited number of founders, and the ability to be free from financial audits, Limited Liability Companies (SRO) are among the most popular legal business structures in the Czech Republic. It may be registered in three weeks if all required documents are presented on time.
The following are the primary prerequisites for a cryptography firm :
- Business plan representing the intricacies and business strategy for business continuity, as well as financial statement specifics
- Registered physical office in the Czech Republic
- Domestic anti-money laundering/counter-terrorism policy development to guarantee the discovery and reporting of fraudulent operations
- Recruitment of an anti-money laundering officer who will be educated in line with the company's operational model and reporting requirements
- Description of any gear and software utilized in the intended economic activity
- Development of data protection measures in line with GDPR and other applicable regulations, which should enable data interchange with authorities.
- Create rules and processes to protect the security of customer funds.
The following are the primary stages for enabling SRO for cryptographic operations :
- Verification of the new company's name
- receipt of a criminal record statement provided by the appropriate authorities proving that there are no restrictions to engaging in crypto-related economic activity
- Obtaining a legal address for a minimum of one year
- Establishing a company bank account
- Transfer of the bare minimum share capital of 1 CZK (approx. 0,04 EUR)
- Getting a mandatory trade license from the Trade License Registry
- The founding contract must be prepared and notarized.
- Payment of state registration costs - 6000 CZK (ca. 243 EUR)
- Registration of the firm in the Enterprises and Tax Authorities Register
- Registration of a firm with the FAA for the purpose of AML/CFT reporting
Czech Republic’s crypto licensing process
Since there is no crypto-specific license in the Czech Republic, organizations wishing to participate in the crypto-related economic activity must follow normal authorization processes outlined by the Trade Licensing Register. The cryptocurrency license procedure, including firm establishment, might take up to four months.
In general, a crypto firm must file an application to one of the general Trade Offices in the Czech language, giving all necessary information about the company and its founders (shareholders). It should be supported by the business plan (covering strategy and operations) and other supporting paperwork.
Applications can be submitted electronically with a secure electronic signature and forwarded to the Trade Register's central Electronic Filing Room. Submissions are processed by a competent Trade Licensing Office designated by the applicant.
The application's evaluation may entail information exchange with foreign regulatory bodies. If the application is approved, a license is provided solely for particular crypto operations. It is important to note that the license may be conditional at times, which implies that a new licensee may be needed to fulfill extra restrictions before operating in the Czech Republic.
Once a crypto firm is licensed in the Czech Republic, it is required to provide necessary reports (for example, customer information) with authorities such as the CNB and the FAU. In the event of mistakes or rejection, the license may be suspended without the option of obtaining a new one, and the firm may be declared fraudulent.
Crypto Taxation
Whatever trade license you choose to apply for, your crypto corporation will become a regular taxpayer in the Czech Republic. Taxation is carried out by the tax authorities. The tax year coincides with the calendar year, however, businesses can pick the accounting year as the tax year.
The tax system of crypto enterprises varies based on the aim of the cryptography activity, but does not differ from that of regular businesses until the EU enacts particular laws. For example, the Court of Justice of the European Union (CJEU) has ruled out that, cryptocurrencies like Bitcoin are treated as traditional currency for VAT purposes, and thus cryptographic exchange services (cryptocurrency for fiat money and vice versa, as well as a cryptocurrency for other cryptocurrencies) are exempt from VAT.
Companies that sell cryptographic products and services must register as VAT payers. For freshly registered VAT payers, the tax term is one calendar month.
Czech Republic's standard tax rates are as follows :
- Tax on branch (BT) – 19%
- Value Added Tax (VAT) – 21
- Medical insurance (SA) – 9
- Corporate Income Tax (CIT) – 19
- Capital Gains Tax (WCL) – 0%-19%
- Social Insurance (SVP) – 24.8
Resident corporations are taxed on their whole income, but non-resident companies are only taxed on income made in the Czech Republic. If the corporation has its headquarters in the Czech Republic, it is considered a resident taxpayer. The taxable income is determined using the accounting profit based on Czech accounting regulations.
Benefits of Owning a Crypto License
A crypto license in the Czech Republic might help your crypto firm achieve credibility among possible investors and partners. It can also assist to shield your company from legal problems because you will be obligated to follow particular service standards and security regulations. A crypto license can also assist to represent your company as a trustworthy partner among consumers and new prospects. It can also help your company stand out from the crowd, especially if your competitors don't have a crypto license.
Summary
When it comes to running a crypto business, a crypto license is essential. It's also something that firms in the industry should become familiar with if they haven't previously. If you currently follow the best standards and run a reputable business, getting a crypto license should be simple. For budding entrepreneurs wishing to establish a new crypto firm, it is crucial to understand that gaining a crypto license is not a straightforward procedure. It entails a significant amount of paperwork and documentation, and the procedure might take many months to complete. Many entrepreneurs will tend to struggle in acquiring a crypto license, in that case, they approach the cryptocurrency exchange development company to get their license fastly.
