FAQ：What’s the use of the cryptocurrency financial license? Which countries can apply to?
1. What is financial license?
Financial License, also known as Financial Institution Business License in China, is the official document that authorizes financial institutions to conduct businesses. At present, Financial License is issued by several departments such as the China Banking Regulatory Commission(CBRC), the China Securities Regulatory Commission(CSRC), the China Insurance Regulatory Commission(CIRC) and so on. Depending on the time period, financial supervision is divided into regulations in advance, in the course and afterwards. A financial license is the normal performance of market access system, which is the core of regulations in advance.
The financial licenses that need to be approved in the traditional financial industry mainly include bank, insurance, trusts, brokerages, funds, futures, financial leasing, fund subsidiaries, fund sales, third-party payment licenses, microcredits and pawns.
2. What’s the use of cryptocurrency financial license?
A Cryptocurrency financial license generally refers to a license to operate cryptocurrency-related businesses in a certain country or region. A cryptocurrency financial license allows the institution to conduct local businesses and provide derivative services related to cryptocurrency, such as the opening of cryptocurrency exchanges, payments, cryptocurrency financial derivatives and so on.
The issuers of the cryptocurrency trading license is generally the national central banks, financial regulatory agencies and legal departments which certainly is an important participant. There are also great differences in license application standards in various countries. Some countries and regions even require applicants to apply for relevant securities, Banks and fund license at the same time.
3. Which countries have issued cryptocurrency trading licenses?
At present, the countries that have issued relevant licenses for the cryptocurrency trading industry mainly include Japan, the United States, Switzerland, Thailand, Canada, the Philippines and so on. These countries differ in attitudes toward cryptocurrency and ICO, as well as the standards for making relevant laws and regulations. However, by issuing cryptocurrency financial licenses, they will bring cryptocurrency and ICO under supervision and regulation, in general, to protect the the market and investors, and promote the existence of cryptocurrency in compliance within the legal framework of the country. Here’s a detailed look at the past initiatives in these major countries:
The United States
The states of U.S hold different attitudes toward cryptocurrency. In April, 2017, Washington State passed Act №5031 which requires cryptocurrency exchanges to apply for licenses and to be reviewed by an independent third party. Meanwhile, there’s a need to purchase a certain amount of “risk guarantee bonds”, the amount of which is related to the trading volume of the previous year. Other states in the U.S are also actively implementing license management for cryptocurrency trading platforms.
On March 7 this year, the US Securities and Exchange Commission(SEC) issued a notice stating that a recognized cryptocurrency exchange must be subject to the same compliance as stock exchanges, and should fully disclose the technical details as well as the financial control principles to the government and the public. In addition, a margin that can be audited should be reserved. In other words, US cryptocurrency exchanges need to be jointly licensed and regulated with existing financial exchanges or compliance agencies.
In April, 2017, the Japan’s Financial Service Agency(FSA) enacted the Payment Service Act to strongly regulate cryptocurrency exchanges. The act sets the operating standards for exchanges and recognizes Bitcoin as a legal tender. All exchanges are required to file with the authorities by the end of September and provide corresponding assets evaluation as well as financial statements to ensure compliance with the requirements of the new act. In addition, all Bitcoin exchanges in Japan must be authorized by the Ministry of Finance and FSA, otherwise they cannot operate as cryptocurrency exchanges.
The FSA said on September 24 that from October 1st, Japan’s cryptocurrency exchanges will be placed under a comprehensive regulatory framework, which includes monitoring internal systems of exchanges, checking customer assets protection mechanism and possibly on-site inspections.
In July 2017, the Swiss government declared that it was working on a legal framework for financial technology Fintech. The new regulation was passed on July 5 and came into effect in August. In its new plan, the Swiss government has set up a cryptocurrency regulatory“sandbox”, aiming to create a more relaxed environment for Bitcoin start-ups.
As Switzerland always being open-minded to cryptocurrency, Swiss Financial Market Supervisory Authority(FINMA) even expresses its expectation to support the ICO market, promote the development of the new blochchain technology and issue a set of guidelines aimed at letting companies know how to comply with anti-money laundering and securities regulations. In early 2018, led by financial shareholding experts from Switzerland, the United Kingdom, Australia, Germany and Turkey, ALLCCTC(ALL Coin Blockchain Transactional Centre) , a cryptocurrency financial exchange born under the support of Swiss Bank Corporation, was established with the goal of setting a universal trading standard for cyptocurrencies all around the world.
Canada is one of the most transparent countries in the world with regard to cryptocurrency trading legislation, and has a relatively clear definition of cryptocurrency, believing that the cryptocurrency doesn’t have monetary atturaribute. Stephen Poloz, governor of the Bank of Canada, said on January 25 that cryptocurrencies are technically securities. The Canadian Security Administrator(CSA) issued a regulatory notice on August 24, 2017, confirming the potential applicability of Canadian securities laws to cryptocurrencies and related transactions, as well as market operations, and providing market participants with guidance to analyze these requirements.
In October, 2017, the Ontario Securities Commission (OSC) announced its support for cryptocurrency and ICO on Twitter,saying that”cryptocurrency has the potential to change the way Canadians use financial equipment, ” “We strongly support innovation in this field … We will formulate flexible programs and believe that cooperation with enterprises and investors is very important so as to find the right balance.”In addition to providing services to help companies comply with Securities Law, OSC has also established a dedicated team to help issue cryptocurrency.
In September, 2018, ONEROOT obtained the Money Service Business(MSB) license issued by the Canadian government, which is the first MSB license in Canada to permit cryptocurrency related services. The holders of this kind of licenses can provide cryptocurrency related services in compliance with the regulatory in Canada, such as transactions, payments and derivatives, etc.
Since February 2017, the Bangko Sentral ng Pilipinas(BSP) has been actively deploying cryptocurrency exchanges into the regulatory net, hoping to regulate this emerging market and promote its orderly development. Currently, BSP has issued the first batch of exchange licenses in this field and will continue to implement relevant regulatory measures. BSP has issued licenses to two local Bitcoin exchanges.
Nestor Espenilla Jr, governor of BSP, said “The foundation of cryptocurrency exchanges is weak but growing rapidly — that’s why we decide to let them register and the central bank is actively bring these exchanges into its regulatory framework.” Subsequently, BSP is positively reviewing applications for registration of cryptocurrency exchanges.
ONEROOT Won Canada’s First Cryptocurrency Financial License
On September 27, 2018, ONEROOT received the first cryptocurrency financial license issued by the Canadian government. Among the hundreds of organizations applying for the licenses, ONEROOT was the first to pass.
At the same time, ONEROOT is actively applying for cryptocurrency financial licenses in 22 other countries and regions, and rapidly promoting the global expansion of “Distributed Decentralized Trading System”.