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Despite the absence of legislation, Slovakia has a number of benefits that make it appealing to cryptographic businesses seeking a license in a European country. It is high time to learn how to unlock a licensed crypto business in Slovakia if you want to benefit from the low startup costs, the competitive and business-friendly tax system, the services of nominee directors and shareholders, the lack of restrictions regarding foreign assets and employees, as well as the maximum level of productivity in Central and Eastern Europe. This is probably one of the crucial reasons why individuals are investing in crypto exchange development, especially in the Slovak jurisdiction.
Since Slovakia's regulations governing cryptocurrency activities are somewhat in line with EU law, obtaining a license is mostly necessary for AML/CFT compliance. Despite the fact that the national authorities have acknowledged the significance of cutting-edge technology and even provided some insight into crypto taxation, they currently favor a liberal approach to crypto regulation, which means a comprehensive crypto regulatory framework won't be implemented anytime soon.
The National Bank of Slovakia (NBS) is in charge of regulating players in the Slovak financial system and upholding a stable monetary policy. Even if the cryptocurrency activity pertains to conventional payment methods, authorities are currently not allowed to regulate cryptographic asset providers through the issuing of a license (for example, exchange for fiat money). According to NBS, cryptocurrencies are defined as digital assets that are decentralized, based on cryptography, and often employ blockchain technology. Electronic tokens or coins are other terms. The process of producing cryptographic assets is referred to as mining. There are various kinds of cryptographic assets. These are:
- Virtual assets: have no rights associated with them and may only be used to exchange other virtual assets and fiat currency, or to pay for products and services.
- Utility tokens: can be used to acquire goods or services in the future from the company that issued the tokens.
- Investment tokens: may grant the holder the right to take part in management decisions or obtain assets (future earnings) that the token's creator acquires.
The NBS has unveiled a regulatory framework whose primary goal is to foster innovation across the nation by evaluating novel items and fostering collaboration between market players and other pertinent entities. The stakeholder database fulfills this need by making the contact information of several businesses under NBS management accessible.
In general, the NBS legislation does not specify or control cryptographic assets & associated economic activities until they are covered by another regulatory framework designed for the financial sector. The NBS and other national authorities consult EU and national legislation to determine whether each unique commercial situation qualifies as electronic money, financial instruments, or other regulated units. However, the NBS currently grants no authorizations for cryptographic activity (for example, a license to deal in foreign currency or a license to issue electronic money).
NBS also cites an assessment produced by the European Banking Authority (EBA) on cryptographic assets in the context of EU regulation. Although the EU has yet to adopt a full legal framework for crypto firms, officials claim that current financial market regulation is being implemented in certain situations. For example, if cryptographic assets are classified as electronic money, the Second Payment Services Directive should be applied. The European Securities and Markets Authority (ESMA) produced a paper in 2019 that outlined the qualities and functionalities of virtual assets as well as their probable categorization.
Because the crypto-related commercial activity is deemed regulated commerce, any organizations wishing to offer cryptocurrency services (including cryptos and fiat money) or crypto purse services in or from Slovakia must first register with the Trade Licensing Bureau. This obligation is based on Law No. 279/2020 Coll., a revision to Law No. The Trade Licensing Authority issues the following licenses based on the type of crypto activity:
1. License for Cryptocurrency Exchange Services for Companies That Allow Cryptocurrency Trading for Other Cryptos, Fiat Money, and Other Assets, Including Crypto ATMs
2. License for Wallet Services for Businesses That Offer to Protect Crypto assets or Private Cryptographic Keys on Their Customers' Behalf, or Store and Transfer Cryptoassets
Since these cryptocurrency transactions are included in the category of regulated transactions, crypto-entrepreneurs must also meet educational requirements and other standards specific to financial market participants (such as the implementation of internal AML/CFT policy and data protection models), in addition to the general requirements (being at least 18 years old, having legal capacity, and having no criminal record). The regulations outlined in Schedule 2 of the Trade Licensing Act define professional competence in regulated businesses.
The licensing procedure typically takes four to six weeks, with the Trade Licensing Authority issuing a license within three working days if all essential information and documentation are presented appropriately. Any changes to the licensee's structure or activity should be brought to the authority's knowledge. Documents reflecting this modification must be presented within 15 days of its implementation. Steps to getting a regulated commerce license in Slovakia for your crypto activities include:
1. Create a corporation in Slovakia with a legal address.
2. Notify the Trade Licensing Office of your desire to start a crypto business in Slovakia, either at their office in your permanent residence region or, if you are not a permanent resident, at their office in the region where your firm is registered.
3. State fees can be paid via an e-tax stamp, cash, or bank transfer (5 EUR for unregulated trades or 15 EUR for regulated trades)
4. Submit an application in Slovak by visiting one of the Trade Licensing Office's local offices near your residence or online through the Central Public Administration Portal.
1. Application Form
2. Articles of Association and other legal documents
3. Proof of the location of the registered office in Slovakia (a virtual office is permitted). It might be either a lease agreement expressing the specific business objective or a formal approval signed by a notary of the property owner.
4. Proof of the founders' and directors' permanent residency
5. Evidence of appropriate professional expertise allowing the founders and top management to engage in cryptocurrency activities
6. Certificates given by the General Prosecutor's Office (or by home country authorities) showing that the founders and senior management have not been jailed for committing an economic crime or another criminal relating to the proposed commercial operations (it must not be issued earlier than 90 days ago)
All papers must be translated into Slovak by a translator authorized by the Slovak Republic's Ministry of Justice.
All Slovak businesses involved in crypto-related economic operations must register with the tax authorities in Slovakia. They, like any other business, can pick a regular tax year that corresponds to a calendar year or another 12-month period. In 2018, the Ministry of Finance produced a guidebook that defined the tax system for cryptocurrencies. According to the authorities, cryptocurrency income is taxable, as is any type of trade related to cryptocurrencies (for example, the exchange of virtual currency for other virtual money or commodities or services). Cryptocurrencies are recognized as short-term financial assets other than fiat money for tax purposes, and they are evaluated at market value at the time of transaction.
Some cryptographic transactions, such as revenue earned from virtual currencies gained through mining within the tax period of use, are not included in the tax base under the modified Income Tax Act. Instead, it should be included in the tax base of the tax period in which virtual currencies are sold. Tax expenditures on virtual currency are likewise governed by the Income Tax Act. The expenses can be used to compute the total value of the virtual currencies' entry price throughout the taxable period in which they are sold, up to the amount of income from their sales, as a tax expenditure.
This blog may have already provided you with a comprehensive summary of the steps required to obtain a crypto license in Slovakia in 2023. If the entire process looks tedious to you, it is always best to deal with a cryptocurrency exchange development firm that has expertise in developing a global crypto-based venture. Nowadays, there are several firms that offer their services at a low cost. All you have to do is deal with a reliable organization. It's past time for you to join the crowd because every company is involved in the cryptocurrency sector in some form. Take advantage of this once-in-a-lifetime chance to make 2023 your own!