It’s an unfortunate fact in the offshore world that the sector attracts more than their fair share of frauds and fakes. These individuals usually set about marketing a product that either doesn’t exist or isn’t intended for the purpose it is marketed for. The Seychelles Cryptocurrency License is a recent example of such fraudulent marketing because…it doesn’t exist.

What Do You Mean the Seychelles Cryptocurrency License Doesn’t Exist?

Currently, the Seychelles has no regulation or license process in relation to crypto exchanges or ICO businesses. This means that there is effectively no licensing regime in place currently to deal with this new type of fiduciary or exchange operations. It’s simply a case of the law not having caught up to the reality of the cryptocurrency markets.

However, unscrupulous offshore marketers have effectively been offering Seychelles Cryptocurrency Licenses to unsuspecting start-ups globally. In fact, what they are offering is simply a standard Seychelles offshore company formation at a much-increased price. It’s a dishonest business practice that needs to stop because it gives the legitimate offshore world a bad name.

Additionally, it puts the potential crypto start-up in an awkward place because your new Seychelles company is effectively operating in a legal grey zone. Indeed, at the moment the island nation is considering regulating or banning crypto operations and the FSA is working on a position paper to move forward with some sort of regulatory regime.

Subsequently, operating in the Seychelles brings with it plenty of risk given its unregulated nature and could see you ending up with an FSA warning like what Huobi Global received. This could be the death knell for your business in the long run.

But I Purchased a Seychelles Cryptocurrency License and It’s Real!

If you actually have a legitimate license from the Seychelles FSA, you will find that it isn’t what it purports to be. As previously mentioned, the Seychelles has no crypto regulation regime but what some offshore marketers have been doing is selling you a Securities Brokers license and telling you that it covers crypto as well.

Unfortunately, if you have one of these Seychelles security broker licenses then you are not covered for any crypto transactions/operations at all. The central bank does not recognize cryptocurrency as a legitimate currency and, therefore, no crypto operations are licensed in any way.

As part of the company formation process, the marketer will often ask for a one-page summary of your business operations and this may lead you to believe that the operation has been cleared and accepted by the Seychelles FSA. This isn’t the case, and that summary has no bearing on what you can lawfully undertake with that company structure.

Can I operate Unlicensed and Unregulated in the Seychelles?

The short answer to this is that you can absolutely operate a Seychelles offshore company in the unregulated grey space and many operations like Binance do exactly that. However, it comes with increased risk of regulation from the local FSA, and this could see the tables turned on you, and assets frozen, at any point.

As mentioned, the local government is presently looking at regulating or restricting crypto operations and a decision is expected this year (2024) on their future plans. However, just as likely is the immediate passing of legislation to restrict crypto to all but the biggest operators.

Banking Restrictions for the Unregulated Cryptocurrency Operator

One of the other issues facing those running crypto businesses in the Seychelles is access to banking services. Globally, banks have been on a tear lately in tightening up their KYC and AML procedures. What this has brought about is a low-risk tolerance in accepting new clients with any connection to the crypto industry.

Talk to any crypto operator and they will tell you the same thing… accessing traditional banking is the biggest hurdle that they face.

Unfortunately, this is compound in the Seychelles where you have limited access to local “offshore” banks and these banks typically don’t want to deal with unregulated crypto companies. This means that you could pay a significant amount of money to set up a “crypto exchange” in the Seychelles and then discover that you simply can’t find any traditional bank to give you a fiat hookup.

Seychelles Cryptocurrency License – The Future?

Firstly, the very nature of political decisions is fraught with uncertainty, and in this case, the Seychelles is no different. The reality is that a decision on the future of crypto operations within the island nation is due out this year and could swing either way.

Potentially, the nation’s primary interest is keeping the offshore banking sector intact as it provides valuable revenues. The risk of regulating crypto is that it could place correspondent banking facilities at peril given the reluctance of major global banks to work with crypto.

Therefore, I suspect that the government may take a cautious approach and seek to either outright ban the sector or, alternatively, overregulate it. The risk with such regulation is that it could make it almost impossible for smaller start-ups to receive a license thereby negating the usefulness of the Seychelles as a crypto haven.

What Jurisdiction Should I Consider for a Cryptocurrency License

If you are seeking a highly legitimate jurisdiction, with full banking facilities, then the New Zealand cryptocurrency license is probably a good choice. However, obtaining one from the regulator, the FMA, isn’t easy or cheap. Additionally, the AML/KYC procedures that you will need to adhere to are onerous and take away much of the business you may wish to do.

Personally, If I was seeking a reputable crypto jurisdiction, that balances regulation and ease of operation, I would probably consider Malta a primary choice. The capital requirements and fees are above that required by New Zealand, but their AML and operating environment are a lot more practical.

Regardless, of where you end up operating your crypto exchange, I would suggest you think long and hard over obtaining a license somewhere. The modern world has taken a very sharp turn towards regulation, and I expect banks will continue to crack down on crypto throughout much of 2024.

Subsequently, it’s better to get ahead of the curve and obtain a license if you can afford to do so.