LABUAN CRYPTOCURRENCY EXCHANGE LICENSE
A cryptocurrency exchange or a digital asset exchange is a digital platform that offers digital asset issuers to list their digital assets (including cryptocurrencies) for investors to invest or trade in ‘crypto to crypto’, ‘fiat to crypto’ and/or ‘crypto to fiat’.
In return, crypto investors or traders shall purchase or trade in their preferred cryptocurrency of choice listed in an exchange platform via credit card payment, e-wallets or other forms of payment in exchange for digital currencies. As of 2018, the Labuan Authority welcomes cryptocurrency and digital exchange as part of its license offerings.
Labuan enables you to deal with international markets with 100% control without the intervention of a local Malaysian whilst enjoying the 3% corporate tax. Labuan, a “mid-shore” jurisdiction, allows one to deal with the Malaysian market however is subjected to local 24% tax.
In April 2019, Fusang Exchange (Asia’s first fully licensed securities exchange focused on digital assets) obtained its Securities Exchange approval from the Labuan Financial Services Authority. The Labuan Authority has stepped up efforts to regulate trading and exchanges, hence the Cryptocurrency Exchange is licensed and made legit with adequate KYC compliance and AMLA regulations for on-boarding clients to build sustainable businesses.
Labuan, being the substance-enabling jurisdiction at an affordable cost, allows the exchange to easily demonstrate operations substance in the jurisdiction where the cryptocurrency business is domiciled. A low-operational cost and fully compliant jurisdiction are a highly sought after jurisdiction by most cryptoprenuers! It is permitted for a Labuan Cryptocurrency Exchange applicant to apply for an ICO license at the same. For more information, please refer to Labuan ICO License.
KEY ADVANTAGES OF A LABUAN CRYPTOCURRENCY EXCHANGE
- 100% foreign ownership, Malaysian local partner not required
- 3% corporate TAX on trading profit
- NO Withholding Tax on Interest, Management Fee, Royalty Fee and Technical Fee
- NO FOREIGN EXCHANGE CONTROLS
- NO Stamp Duty and GST
- NO Import Duty / Sales / Service Tax
- NO Capital Gain Tax and Inheritance Tax
- Ability to access more than 70 Malaysia Tax Treaty partners
- 50% tax abatement for expatriate professionals/managers’ employment
- 100% tax exemption on director’s fees for foreign directors
- NO tax on dividends to shareholders
- 2-year multiple-entry working visa (renewable) to stay in Malaysia - Optional
Qualifying Eligibility for A Labuan Cryptocurrency Exchange License
- Individual or institution with cryptocurrency exchange expertise with a good track record and sufficient years of experience in the industry
- Regulated cryptocurrency exchange or provider of such services from other jurisdictions with approval from home authority with the letter of consent
- Any licensed institutions including approved cryptocurrency exchange under the Financial Services Act 2013 with approval from the Central Bank of Malaysia
Regulatory and Operational Requirements for A Labuan Cryptocurrency Exchange License
- Minimum paid up capital of MYR 10,000,000 (or equivalent) unimpaired by losses with a certificate of evidence from the banks within Malaysia and Labuan
- Must maintain an operational office in Labuan and all transactions must be done to, through and from Labuan
- Transact in foreign currencies of your choice, including Malaysian Ringgit (MYR)
- Transaction with Malaysian residents is permissible, including authorised dealers approved by the Malaysian Exchange Control
- Where technology client interface is deployed, any intrusions or malfunctions of the systems including adverse incidents discovered must be reported to Labuan FSA on the root cause and an impact analysis report is to be submitted within 14 days
- The company must appoint an approved external auditor to carry out an audit of business operations annually
- Maintain a separate account for clients’ monies and each transaction is to be marked clearly. All withdrawals are to be reported within 3 working days
- All written agreements and contracts with clients and any party are required to be documented
- Mandatory to observe and comply with the AML/CFT Act and Guidelines issued by Central Bank of Malaysia and Labuan Authority via the provision of a compliance officer
- Changes on shareholders, directors, office location, additional office outside Labuan and outsourcing arrangements require prior approval from Labuan FSA
- Yearly license fee payable to Labuan FSA is MYR 40,000 (approx. USD 10,000 or equivalent)
Important Documents Required for A Labuan Cryptocurrency Exchange License Application
- A three (3) years Business Plan with its financial forecast and marketing strategies
- Profile of all Directors and Shareholders, including their qualifications
- Latest two (2) years Audited Accounts for current corporate company (if applicable)
- KYC, AMLA and Operations Manual / Procedures
Application Timeframe
- Approximately 30 to 60 days, subject to further information and supporting documents required by Labuan FSA during the approval process
- Interviews / Meetings with the key personnel may be requested by the Labuan FSA to understand or clarify certain processes
STEPS to Apply for A Labuan Cryptocurrency Exchange License
Our services to help you set up a Labuan Cryptocurrency Exchange:
- Consultation on client's eligibility and application procedures
- Feasibility study write-up based on client's profile
- Due Diligence, Profiling and Guidance on documents preparation
- Construct exclusive Business Plan to meet client's business objectives
- Preparation of Financial Forecast, KYC, Operation and AML/CFT Manuals, Client Agreements etc
- Submission and supervision of application process until approval
- Act as liaison and key contact person for both client and Labuan FSA on all correspondences, meetings and /or interviews (if any)