Which regions are the most comfortable for crypto business?

The regulation of cryptocurrencies in the world ranges from a complete ban on digital tokens to their recognition as legal tender. From time to time, the governments of certain countries pass laws forcing crypto businesses to migrate.

Thus, the ban on the production of cryptocurrency in 2021 in China caused a massive exodus of miners from China. In 2023, due to the tightening of regulation in Canada and the United States, many exchanges stop their activities there and move to Asia and Europe. Binance and Bybit have already announced their exit from the Canadian market, Coinbase plans to open an office in Dublin.

On the other hand, certain regions are adopting clear regulatory rules for the crypto industry, which also attracts crypto firms. Hong Kong has allowed retail trading of digital assets since June 1. Huobi, Gate.io, OKX and many others are already entering the local market. Gemini and Bybit are opening offices in Dubai, Binance has been working there since last spring.

The experts told RBC-Crypto” about how crypto companies choose jurisdiction, why some regions are especially popular, while others are not.

For a specific project

The question of the favorable jurisdiction for cryptocurrency companies is not so unambiguous and obvious, says Efim Kazantsev, a member of the Commission for the Legal Support of the Digital Economy of the Moscow Branch of the Russian Bar Association. He explained that auspiciousness consists of a large number of nuances and does not have a universal character.

In addition, the lawyer noted that the foreign policy environment, sanctions and restrictions also affect the favorableness of a particular jurisdiction.

This point of view is shared by the expert of the educational platform Moscow Digital School Maria Telegina. According to her, in the issue of the place of registration, it is necessary to analyze various aspects and, based on them, choose the most suitable jurisdiction for a particular business.

When choosing, the expert considers it necessary to pay attention to geography (where the main counterparties are located), the level of regulation, the main type of crypto business (exchange, mining, provision of intermediary services, exchanger, etc.), the taxation regime and the position of the state in the geopolitical arena.

Simple, fast, cheap

Any cryptocurrency startup seeks at the initial stage to minimize costs, including those associated with the legalization of its activities, says Sergey Mendeleev, head of InDeFi Smart Bank.

For a crypto company (especially Russian), registration and licenses are needed primarily to interact with the outside world, for example, to place their applications in the App Store or Google Play or open corporate accounts on large exchanges, the expert explained.

According to him, the most important criteria are three parameters – ease of opening a legal entity (ideally, remote registration), speed (ideally, several days) and a price not exceeding several thousand dollars. As a “cherry on the cake”, there may be a presence in the company’s charter of prescribed crypto-currency activities, especially in those jurisdictions, the expert clarified, where obtaining a crypto-license is impossible or not necessary, since usually this process requires much more time and costs than registration itself.

“Popular Destinations”

It is precisely because of the speed, simplicity and inexpensive registration of a business that regions such as Georgia or the Seychelles are popular – these countries win in comparison, for example, with Dubai or Hong Kong, where everything is a little more complicated, longer and more expensive, Mendeleev said.

According to him, in Europe, crypto businesses, if their owners have Russian passports, are not welcome, but there are precedents when a company is registered for nominal owners with the required citizenship. And if earlier Estonia was the leader, now Lithuania, to a lesser extent – the Swiss Zug, “and if there is a lot of time and money”, then England, the expert added.

The most favorable jurisdictions are those that support the crypto market, have special regulation and, as an addition, provide preferential tax treatment for such businesses, Telegina believes. The most obvious example of such a region, she says, is Dubai. In addition, the United Arab Emirates is relatively neutral in the international financial market in terms of various geopolitical aspects, the lawyer added.

She noted that Hong Kong, Switzerland and the Netherlands also have a positive attitude towards the cryptocurrency business, they have regulation, but the taxation regime in them is not so favorable.

There are countries that are not against cryptocurrencies, but at the level of regulators they warn both businesses and consumers about the high risks of such assets (for example, Georgia, Russia), Telegina said. She clarified that such jurisdictions generally oppose the use of cryptocurrencies in their territory, in particular the use as a means of payment.

Some crypto exchanges choose Dublin, the capital of Ireland, because the country is a member of the EU, has an established reputation as a financial and technological center, and provides a favorable tax regime for its residents, Telegina added.

According to Kazantsev, Dubai, Hong Kong and Georgia are increasingly in the news as crypto-friendly regions, not only and not so much because they are somehow particularly favorable to cryptocurrencies, but rather because they are generally friendly to revolving business. , including cryptocurrencies.

There are no special preferences for cryptocurrency projects, the lawyer says. As there are no prohibitions that impede the activities of cryptocurrency companies. Practice shows that the absence of bans is quite enough to attract a significant number of companies looking for a new place to work in the current situation, Kazantsev added.

“There are more problems than profits”

In the US, the situation is not easy, says Mendeleev. According to him, obtaining a crypto license there can be compared in complexity with opening a full-fledged bank.

The United States is introducing regulation, but in accordance with this regulation, cryptocurrencies can fall into various categories: securities, cash, goods, Telegina explained. Thus, depending on the classification of a cryptocurrency, different legal regimes may apply to it. And this, in turn, gives some instability to the industry, the lawyer says.

Cryptocurrency business in Russia

Russia, unfortunately, cannot boast of being particularly friendly to cryptocurrency companies, Kazantsev says. He recalled that the status of cryptocurrency is still not fully defined in our country, and the cryptocurrency business is actually in a gray zone.

We do not have a direct ban on cryptocurrencies, but anyone who tries to engage in a crypto-currency business in any significant volumes will sooner or later face difficulties in the banking and tax sphere, the lawyer says.

As a rule, wherever it is easy to register a crypto company, it is just as easy to do business with regulators who are committed to the development of the crypto sector in their countries, Mendeleev says. There is not a single officially registered cryptocompany in Russia, since a license cannot be obtained and OKVED cannot be registered, the expert says. According to him, at best, it can be a “technical LLC” for which an office is rented and through which employees’ salaries and taxes are paid.

According to Telegina, Russia is not the most attractive jurisdiction, not only because there is no regulation as such. The changing opinion of the regulator (from a complete ban to possible cross-border crypto payments) and not the highest positions in the geopolitical arena (the presence of a large number of sanctions) also prevent crypto companies from developing in the country.