Crypto License in Czech Republic

Crypto-authorization process in the Czech Republic Virtual Currency Registry

The authorization process to successfully get a business in the Czech Republic virtual currency registry is as simple as it sets. A new project can be up and running in just 2 months, following a straightforward process.

Getting into the details of the process, the key element to get successfully registered is to have properly prepared documents for AML-KYC. In the case of existing and operational companies, existing policies and procedures can be reused, though it is strongly advised to have them checked and adjusted beforehand.

Such a process would also include communication to the regulatory authorities, therefore streamlining the process and optimizing chances of success in having the registration approved.

The registration of Czech Republic Company in Register of crypto currency companies

The process of registration of a Czech Republic company in the Trade Register for crypto currency activities can be broken down into 5 separate steps, as follows:

1. Incorporation of a limited liability company in the Czech Republic
2. Appointment of a contact person
3. Drafting of AML-KYC related documents
4. Application to the Trade Register
5. Opening of a corporate account in an EMI

The incorporation of a Czech limited company (s.r.o) is always step number one. A crypto business in the Czech Republic shall be either a resident natural person or a Czech registered legal person. A Czech limited company does not require a local director.

Appointing a contact person is usually the critical point of the process. The contact person will be liable to communicate client and transaction information, pertaining to the AML Act of 2018.

Drafting the AML-KYC policies for internal use is required to comply with the AML Act as well. These documents should give a clear understanding of how clients are identified and how their transactions are monitored, in order to report suspicious activity.

Then the application is carried to the Trade Register. Once successful, the company is granted a registration number and a certificate.

The final step of the process is to open a crypto bank account. Usually, Czech crypto businesses are relying on Electronic Money Institutions (EMI) to be provided with banking services.

Governmental Statements on Crypto in Czech Republic

The Czech Government and Governmental Institutions have not issued statements on crypto assets as of 2024.

The Czech Republic is the typical example of a jurisdiction that is pro-crypto and willing to give room to crypto entrepreneurs, while being in a way limited to the freedom it can provide because of supranational rules (EU laws, FATF and OECD standards).

This ensures an empowering framework for crypto businesses to flourish and a high level of trust and protection for clients of these companies.

Importantly, the current framework shall be overhauled by MiCA in the Czech Republic, in the future. MiCA, for Markets in Crypto Assets, is the upcoming European framework. Once this regulation is applied in the Czech Republic, the license shall change accordingly.

Requirements for companies engaged in crypto activities in Czech Republic

Entering the Trade Register of crypto companies in the Czech Republic gives a company the right to operate in the field of digital assets, provided they respect the requirements set by the Czech AML law.

These requirements include:

• The participants shall provide an Apostilled/notarized proof of non-criminal record, along with ID documents;
• The participants have demonstrated competence in the field with their CV;
• Systems and software compliant with the AML laws, for conducting and supervising transactions;
• Internal procedures in line with the AML laws;
• AML policies and training material for participants and employees;
• Staff training at least once every 12 months;
• Appointment of an AML officer and a director, none of which needs to reside in the Czech Republic.

The process of setting up a company for a cryptocurrency business in the Czech Republic

Setting up a limited liability company for a cryptocurrency business in the Czech Republic is very simple. It can be done entirely remotely, through a Power of Attorney.

Usually the formation of a crypto company takes 2-3 weeks in the Czech Republic. The process requires choosing a company name, providing a certified copy of a passport and describing the intended activity.

The applicant will be provided with an incorporation certificate, that is step number one to apply for the crypto license in Czech Republic.

Taxation for cryptocurrency companies in the Czech Republic

The corporate income tax that applies to Czech limited liability companies is 19%. This rate therefore applies to cryptocurrency companies as well.

Payouts distributed by a Czech crypto company in the form of dividends are taxed to the level of 15%. Czech Republic benefits from numerous tax treaties to avoid double taxation. In order to properly sort out tax matters, it is advised to consult a tax lawyer in the residence country of the beneficiary of a dividend payment.

Obligations for crypto companies in the Czech Republic

Any company registered as undertaking crypto business in the Czech Republic, having been entered into the Trade Register as such, is liable to comply with the AML laws in force. It is pretty straightforward, the Czech AML laws being in fact the EU AML directives applied by decree.

In the life of a cryptocurrency business, this means enforcing KYC/KYB when starting a business relationship with a client. It also means implementing AML-CFT measures of monitoring and reporting transactions, depending on thresholds, risk assessments and internal procedures.

For example, it shall be very clear what happens in the case of the following events:

• Alice, from Denmark, makes a few crypto transaction of a couple hundreds euros every month;
• Bob, from Uzbekistan, makes a one time crypto transaction of 50 000 EUR.

Sanctions for violating Czech Republic crypto-business obligations

A cryptocurrency business in the Czech Republic operating without a crypto license is liable to a financial penalty that can go as high as 500,000 CZK (about 20,800 EUR). The participants may also be struck as not being trustworthy and reliable, potentially barring them from applying to the license later on.

It is also important to note for foreign investors that the Czech Republic expects perfect transparency regarding ultimate beneficial owners of companies (UBO). Failure to properly register and disclose the expected information regarding the UBO of a cryptocurrency business can lead to sanctions of up to 500,000 CZK (20,800 EUR approximately) as well as criminal liabilities depending on the case at hand.