How to Choose a VASP License: A Guide for Crypto Businesses

As the global crypto market grows, market entry and operational setup are top of mind for businesses in this space. 

However, new regulations and increased scrutiny on digital assets mean obtaining a VASP (Virtual Asset Service Provider) license is now mandatory, not optional. 

Securing a VASP license in a reputable jurisdiction is key for market access, ensuring regulatory compliance, and avoiding risks like fines, penalties, or operational shutdowns. 

This article explains why Virtual Asset Service Provider licensing is important, where and how to get one, and how Legal Nodes can simplify the process.

What is a VASP license, and why is it important?

A VASP license is mandatory for businesses involved in digital assets, including cryptocurrencies, NFTs, tokens, and similar instruments.

Entities such as cryptocurrency exchanges, wallet providers, crypto payment processors, OTC trading desks, and staking platforms require this license to promote their services and onboard (solicit) customers in local markets.

State financial authorities like central banks or financial supervisory authorities issue the VASP license when the business meets specific requirements outlined in the local VASP or similar law that governs digital assets, financial services, or related activities.

It ensures compliance with strict regulatory frameworks, including AML (anti-money laundering), KYC (know-your-customer), and CTF (counter-terrorism financing) requirements.

Getting a VASP license is not a one-time event; it requires ongoing attention and compliance. The license can be taken away in case of non-compliance or violations of regulatory requirements.

Securing a reputable VASP license legitimizes your business operations and increases trust and credibility among users, investors, and partner organizations.

Key benefits of obtaining a VASP license

Beyond compliance, securing a VASP license offers significant advantages for your business.

Access to global markets

A VASP license in key markets lets your business expand globally and attract international customers.

Some jurisdictions, like the EU, offer "passport rights," allowing a license from one member state to cover operations across the entire EU.

Increased credibility and trust

A VASP license from a reputable jurisdiction builds customer confidence in your business and improves your brand reputation.

Financial institutions, like banks and insurance companies, require proof of compliance to work with you, making this license key for forming partnerships in regulated markets.

Protection against legal risks

A VASP license requires you to implement strict AML, KYC, and CTF practices. It helps you assess transaction risks and insurance policies to protect your business, manage unexpected challenges and improve operations.

Types of businesses requiring a VASP license

The following businesses typically need a VASP license to operate legally.

Crypto exchanges and trading platforms

Due to incidents like Nexo, KYC and AML requirements are now mandatory for any company that wants to operate in the crypto exchange and trading industry. If you plan to work in regulated jurisdictions, a VASP license is essential.

Custodial wallet providers

Since custodial wallets manage users’ private keys and hold their assets, they pose higher risks and require stricter compliance. A VASP license is mandatory to offer these services.

Read our article to learn more about custodial and non-custodial wallets.

Crypto payment processors and remittance services

If you want to let users pay with cryptocurrencies, a VASP license is a must. It’s key for collaborating with traditional financial institutions for crypto-to-fiat conversions and enabling seamless transactions between users and merchants in a typical POS setup.

Other virtual asset businesses

While exchanges, wallets, and payment processors are the most common, other businesses dealing with crypto transactions may also require a VASP license.

Examples include:

• OTC trading desks
• Investment funds
• Token issuers
• Payment gateways

Licensing requirements vary by jurisdiction, so consulting legal professionals like Legal Nodes is advisable to determine if and which licenses apply to your business.

Types of crypto licenses and jurisdictional categories

There's no universal answer for selecting a crypto-friendly country or navigating VASP licensing, as requirements vary by jurisdiction and target market. Let's share some examples.

Simplified or no VASP license requirements

First, we have Costa Rica and Panama, two crypto-friendly jurisdictions.

Costa Rica

Setting up a crypto company in Costa Rica takes 1-6 weeks, and businesses only need to comply with general AML/CFT regulations. It makes it an attractive option for initial company setup.

Panama

Under its existing laws, Panama has no specific regulations or VASP licensing rules for companies focusing only on crypto transactions.

The country's leading financial regulators—the Superintendency of Banks (SBP) and the Superintendency of Securities Market (SMV)—have publicly stated they can't monitor or control cryptocurrency-related services due to the lack of regulations, jurisdiction and authority.

The fees associated with setting up a company in Panama are among the lowest globally, making it attractive for crypto startups. There are no strict requirements regarding local office establishment or minimum capital deposits, allowing for easier setup.

While this offers flexibility, you must independently navigate general tax and commercial laws. Panama's territorial tax system means capital gains from cryptocurrency transactions are typically tax-exempt if classified as foreign income.

Moderate regulatory requirements

Several jurisdictions offer licenses that provide new companies access to global markets, making them appealing hubs for crypto businesses.

El Salvador

El Salvador, the first country to adopt Bitcoin as legal tender, although limited recently, offers two types of licenses:

• Bitcoin Service Provider (BSP): This is for businesses operating with BTC issued by the Central Reserve Bank.
• Digital Asset Service Provider (DASP): This is for businesses dealing with other cryptocurrencies issued by the National Digital Assets Commission (CNAD).

Chivo Wallet and Strike have VASP licenses in El Salvador.

Cayman Islands

The Cayman Islands have a dedicated VASP Act, providing clear regulations for the crypto industry.

To get a VASP license, you’ll need to provide detailed documentation, comply with strict security and AML/CFT policies, and submit a detailed business plan and financial statements.

Although the process is demanding, the Cayman Islands stand out as a cost-effective option for crypto businesses thanks to their reputation as a financial hub and tax-neutral policies.

For example, BitMart crypto exchange is registered in the Cayman Islands.

British Virgin Islands (BVI)

The BVI Financial Services Commission oversees VASP licensing under the BVI VASP Act.

While compliance with strict AML/KYC regulations is required, operating under BVI standards ensures alignment with international norms, simplifying expansion into other jurisdictions.

The BVI’s established reputation and regulatory clarity make it a reliable choice for crypto businesses.

Portofino Technologies is one of the companies which obtained a VASP license under BVI last year.

Seychelles

Seychelles has its own VASP Act, which is regularly updated to cover digital wallets, exchanges, virtual asset brokering, investment services, and ICO/NFT registration.

While initial setup costs and regulatory requirements are high, the jurisdiction offers favorable taxes, a clear legal framework, and a strong reputation, making it a solid option for crypto businesses.

Bahamas

The Bahamas, governed by the Digital Assets and Registered Exchanges Act (DARE), requires a license from the Securities Commission of the Bahamas (SCB).

Licensing involves strict regulations, including a physical presence in the Bahamas, capital requirements, and AML/CFT compliance.

The jurisdiction’s tax neutrality, advanced financial infrastructure, and tech-friendly regulations offer considerable long-term advantages for crypto businesses.

Tether, OKX and Bitfinex have licenses in the Bahamas.

Comprehensive regulatory frameworks

The EU is known for its rigid regulatory environment, and all crypto asset service providers that plan to operate in the EU or target EU customers must adhere to strict procedures, including EU’s Markets in Crypto-Assets (MiCA) regulation. Here’s a breakdown of key EU jurisdictions.

Poland

Poland requires crypto businesses to comply with AML/CFT regulations and apply for a license through the Ministry of Finance and the Director of the Chamber of Tax Administration in Katowice.

Key requirements include appointing qualified AML/CFT personnel and implementing robust anti-fraud procedures to prevent money laundering.

While conditions are strict, a Polish license allows operations across the entire EU, simplifying expansion into other jurisdictions.

Lithuania

Lithuania is a crypto-friendly destination with a favorable environment for blockchain and tech businesses.

However, as an EU member, it enforces strict regulations under the Lithuanian Law on the Prevention of Money Laundering and Terrorist Financing.

Companies must register with the Centre for Register of Legal Entities (CRLE) and comply with MiCA regulation.

A key advantage is the fast licensing process, typically completed within three months. However, Lithuania’s tax system is complex and varies by business type.

Estonia

Estonia is a tech-forward jurisdiction with a streamlined approach to crypto regulation. Businesses must comply with AML/CFT laws, including strict KYC, security, and personnel requirements. MiCA will also apply.

Estonia’s key advantage is its streamlined licensing process. Approvals typically take 1-3 months, much faster than many other jurisdictions.

France

France’s PACTE law sets out the requirements for digital asset service providers.

In addition to AML/CFT compliance, France enforces a travel rule requiring businesses to collect identifying information for originators and beneficiaries of crypto transactions.

MiCA will also impact operations in France.

While EU jurisdictions impose strict regulations, obtaining a license in one member state allows businesses to operate across the entire EU, providing significant market access and credibility.

This overview includes popular options for various purposes; it is not an exhaustive list of all countries with VASP licenses.

Key considerations when applying for a VASP license

When choosing a country to obtain your initial VASP license, focus on these three key areas:

• Jurisdiction: Consider your target market when selecting a jurisdiction. Identify where your users or customers are located, as this will dictate the regulatory environment that applies to your business.
• Regulatory requirements: Make sure you comply with AML, KYC, and data protection laws. Higher regulatory standards can enhance your business reputation.
• Financial considerations: Weigh upfront costs against long-term tax benefits. Balance ease of setup with regulatory quality—low standards may harm your reputation.

The right jurisdiction depends on your specific needs, but prioritizing clear regulations, compliance, and financial balance will make your VASP business successful.

Legal Nodes, with partners in more than 20 jurisdictions, assists crypto companies in selecting the right license for their business model and objectives, helping them make an informed decision.

Requirements for getting a VASP license

The exact requirements for a VASP license vary by jurisdiction, but here’s a general overview:

1. General eligibility criteria: Register a company (typically an LLC or corporation) in the jurisdiction. Provide documentation on directors and owners/shareholders, including proof of no criminal records. Meet minimum capital requirements, especially for financial companies.
2. Compliance and operational requirements: Follow AML and CTF regulations and meet security, data protection, and transaction monitoring standards. Hire licensed personnel, establish governance policies, secure insurance, set up risk management systems, and appoint local representatives.
3. Gathering required documentation: Prepare and submit detailed documentation and consider cross-border and language differences. Give extra attention to this step to prevent delays or mistakes.

While VASP license requirements vary by jurisdiction, focusing on eligibility, compliance, and careful documentation preparation will help streamline the application process.

The VASP license application process

The VASP license application process has four phases. Let's explain the key points.

1. Preparation phase: It is the most challenging stage. It requires thorough research, jurisdiction selection, and full regulatory compliance. It involves preparing all necessary legal and financial documents to submit to the regulatory authorities.
2. Submission of application: After ensuring full compliance, you submit your documentation. The formality and cost of this process will vary depending on the jurisdiction.
3. Regulatory review and approval process: Regulatory bodies will review your documentation. If anything is missing, they may request additional information. Depending on the jurisdiction, this phase can take anywhere from a few weeks to six to nine months.
4. Post-approval compliance requirements: Once your VASP license is granted, you can start your business operations. However, ongoing compliance with relevant laws, regular reporting to regulatory bodies, and audits as per AML laws are required.

Challenges in obtaining and maintaining a VASP license

Here's what else you need to have in mind when applying for a VASP license.

• Changing regulatory frameworks: AML/KYC regulations are constantly developing, and it is your job to stay ahead of the curve. For example, the EU Markets in Crypto-Assets (MiCA) heavily impacts the industry, making it essential to keep updated on such changes.
• High costs and resource requirements: While registering a business and paying license fees may not be too complicated or expensive, complying with applicable regulations is where the real costs lie. These are ongoing expenses, as you must maintain compliance as long as you provide crypto services.
• Lengthy approval processes: The approval process can take over six months from the submission date. Some jurisdictions, like Lithuania, Estonia, and Costa Rica, are faster, but the process typically lasts 1-3 months.

How Legal Nodes can help you get a VASP license

Selecting the right jurisdiction for your crypto business is a crucial decision that impacts compliance, costs, and growth potential.

At Legal Nodes, we make this process easier by providing tailored guidance. Here’s how.

Expert analysis of regulatory frameworks

Based on the vast experience, Legal Nodes evaluates your business model, target market, and operational goals to recommend jurisdictions with the most favourable regulatory environments.

Whether you’re looking for a simplified setup or a more regulated framework, we provide clear information about licensing requirements, timelines, and costs in over 20 jurisdictions. 

We assist you in selecting the license you wish to pursue more quickly, within 1-2 weeks instead of months.

Compliance with local and international laws

We collaborate with boutique law firms and independent local providers who previously worked at large legal companies. 

They secure your business compliance with local regulations, such as AML/CFT, KYC, and MiCA in the EU, as well as international standards, while Legal Nodes manages the process.

Our partners provide incorporation and licensing services at no additional cost. Compared to traditional law firms, this arrangement saves you time and money in the process.

It also minimizes legal risks and ensures smooth operations across borders.

Streamlined licensing process

Under our management, our local qualified partners handle the entire licensing process, from preparing and submitting documentation to liaising with regulatory authorities.

They also assist you with appointing qualified personnel, implementing compliance procedures, and meeting capital or physical presence requirements.

Cost optimization and tax analysis 

We identify jurisdictions with favorable tax policies and lower operational costs, such as tax-neutral regions like the Cayman Islands or Estonia’s e-residency program, helping you maximize profitability.

Ongoing support and adaptability

Legal Nodes offers continuous support, helping your company stay compliant as regulations change. We also make it easier for you to break into new markets or expand into additional jurisdictions smoothly.

When you team up with Legal Nodes, you get a reliable partner who takes the stress out of choosing jurisdictions and getting the right licenses so you can concentrate on growing your crypto business.

Get started today.

Final words about getting a VASP license

Selecting the right jurisdictions and getting VASP licenses is an essential part of the process that requires careful research and can take both time and money. But when you approach it the right way, it lays a solid foundation for your business's success. Keeping high compliance standards helps you avoid issues and boosts your company's reputation.

Legal Nodes leads the way in empowering crypto companies with cross-jurisdictional guidance and legal advisory services across 20+ locations. Our experts follow the latest laws and provide tailored advice to our Web3 partners, ensuring their businesses meet all VASP license standards, safeguarding operations while unlocking new opportunities.

Get started with Legal Nodes today, and you’ll never have to worry about VASP licensing and regulatory compliance again, no matter the jurisdiction.

FAQs about a VASP license

What is a VASP license?

A VASP (Virtual Asset Service Provider) license requires regulatory permission to run a crypto business, such as an exchange, wallet, or payment processor.

How to get a VASP license?

Each jurisdiction has its own rules, but, in general, here is what it takes to obtain a VASP crypto license:

• Preparation—you need to choose a jurisdiction and ensure your company meets all of the VASP standards.
• Submission—the next step is to submit the documentation to the regulatory body and answer any inquiries they might have.
• Compliance—after you get the VASP licence, you need to stay compliant with the regulations, as you don't want to risk losing it.

How long does it take to get a VASP license?

On average, you can expect to get a VASP licence in about six months, but it will depend on the jurisdiction. For example, Estonia and Lithuania issue licences 1-3 months after submitting the documentation.

What do you mean by VASP?

VASP is short for Virtual Asset Service Provider, a term that encompasses different types of cryptocurrency-related businesses—crypto exchanges, OTCs, payment processors, staking platforms, and similar. All of these businesses usually need a permit to operate, which is called a VASP licence.