Crypto License in Portugal

What you need to know about the crypto license in Portugal in 2024

The Portugal crypto license is an authorization to provide services related to virtual assets, granted by the Banco de Portugal, the national central bank of the country. It has been enforced since 2021.

The authorization is subject to complying with the AML laws in force in Portugal, and principally law 83/2017 and the provisions added by law 99-A/2021, that specify a few elements pertaining to virtual assets. These laws, as one should expect, describe the rules and requirements to prevent money laundering and terrorism financing, by applying risk management measures such as KYC/KYB and having processes set for supervising client activity.

As of 2024, there are a dozen licensed crypto companies in Portugal. One of the reasons is that the Banco de Portugal expects its participants to set up shop in the country and to participate in its economic life.

In concrete terms, an applicant to the VASP license in Portugal shall have a physical office populated with employees, as well as a share capital of 5.000 EUR minimum (more is advised, as observation shows that licensed companies typically have higher registered capital). As a side note, virtual assets are not legal tender in Portugal.

Crypto license in Portugal: process and timeline

The process to obtain a crypto license in Portugal relies on the compliance with the AML-KYC requirements. The rules are detailed in the Portuguese AML laws and enforced by the Banco de Portugal. The timeline to get a license is about 6 months for a well crafted application.

First, the company has to be created. It must be in Portugal, and Portugal must be where the main economic activity of the company occurs. The company must rent an office and hire a domestic AML officer as well as a local manager/director.

Then the company has to comply with the applicable AML-CFT and KYC legal requirements. Policies, procedures, risk assessment grids, reporting forms, etc, everything need to be laid out before application. A KYC software is also strongly recommended.

As for any company formation in Europe, the UBO will have to provide certified ID documents, a proof of residence and ensure a clean certificate of non-criminal record. At the end of the process, opening a bank account in Europe is possible.

Different kinds of crypto licenses in Portugal

Legally speaking, there is no such thing as a crypto license in Portugal. The Banco de Portugal gives a registered authorization to provide one or more of the following services: exchange services between virtual assets and fiat currencies or between one or more forms of virtual assets; transfer services of virtual assets; safekeeping and/or administration of virtual assets or instruments that enable the control, ownership, storage or transfer of such assets, including private encrypted keys. These activities are listed in the law 83/2017 of August 18th 2017, it is possible to register for all of them.

The minimum requirements for a crypto license in Portugal are:

• Limited company formation in Portugal
• Minimum registered share capital of 5.000 EUR
• Physical office in Portugal
• 1 Director residing in Portugal
• 1 AML officer residing in Portugal
• AML-CFT & KYC documents and systems
• Legal documents of the UBO

The Banco de Portugal, the national central bank of the Portuguese Republic, defines the legality of cryptocurrency businesses as registered activities with virtual assets, carrying out one or more of the following services:

• exchange services between virtual assets and fiat currencies or between one or more forms of virtual assets;
• transfer services of virtual assets;
• safekeeping and/or administration of virtual assets or instruments that enable the control, ownership, storage or transfer of such assets, including private encrypted keys.

Registering as a crypto business in Portugal is conditioned to the application of the AML-CFT law, as well as potentially other applicable regulations, for example in the case of a security token issuance. Emitting such a cryptocurrency in Portugal is legal, but requires licensing to the national securities commission. Under MiCA this will be regulated differently. On this matter, request our MiCA Guidelines for Professionals to ensure full compliance with MiCA when launching your token (utility or security). **

A company willing to engage in a cryptocurrency venture is therefore required to comply with all the laws applicable to its specific activity, and to register accordingly. As the Banco de Portugal and other governmental bodies agree to the proposed activity and provide an authorization, the crypto business can start operating.

Cryptocurrency regulation in Portugal

Though Banco de Portugal has directly addressed the matter of virtual currencies and assets in official statements and on its website, there are no specific regulations on the matter of cryptocurrency in Portugal yet, with the exception of the global MiCA regulations, which will come into force soon.

In the eyes of the Portuguese lawmakers: “«Virtual asset» means a digital representation of value that is not

necessarily linked to a legally established currency and that does not have the legal status of a fiat currency, security or other financial instrument, but which is accepted by natural or legal persons as medium of exchange or investment and which can be transferred, stored and marketed electronically”, as referenced in the Law 99-A of 2021.

The framework for cryptocurrencies are then to be found, as in every European country, in the laws pertaining to anti money laundering and countering terrorism financing (AML-CFT). As it has been officially stated, these rules are the backbone of the crypto license in Portugal.

The previously mentioned Law 99-A of 2021 is actually relevant to the matter of AML-CFT, as it amended the previous regulation set with the Law 83 of 2017.

Portugal Virtual Cryptocurrency Registry

Having a look at the cryptocurrency business registry of the Banco de Portugal gives a clear outlook on the actors operating under a Portuguese crypto license. This register is a document issued in Portuguese on the official website of the Banco de Portugal.

Every crypto licensed company in Portugal is listed in this regularly updated PDF file. A dozen companies have been licensed in about 2 years of existence of the framework, demonstrating that the Portuguese license positions itself as a high-level authorization, aimed for prestigious projects.

It is worth mentioning that out of the dozen companies listed in the register, not all of them have started operation. This means that back and forth are still ongoing (at the issuance of the register update), a foretale that the regulator is expecting strong guarantees and a deep dialogue about the intended activities to build trust and deliver the license.

The process to receive the crypto authorization in Portugal is straightforward. The Banco de Portugal has laid out very clear expectations for an applicant to receive the Portuguese crypto license.

A crypto project willing to get licensed in Portugal should incorporate a company in Portugal first. The Banco de Portugal will only consider “legal persons or entities treated as legal persons incorporated in Portugal” or “natural or legal persons or entities treated as legal persons with domicile or establishment in Portugal”.

This requirement for domestic presence is emphasized by the requirement for substance, meaning the Portuguese crypto company should be operating from “within Portugal”. That means that the company should rent or own an actual office space, and hire personnel on site.

The registration of Portugal Company in Register of crypto currency companies

As the company is properly set up, the registration of the Portugal company in the register of crypto businesses can take place. The crypto business should comply with all the relevant laws and regulations, on the Portuguese and European level. This mainly depends on the intended activities and services to be provided.

Once everything is sorted out, the application will be carried out to the Banco de Portugal and a dialogue with the crypto regulator in Portugal will begin. As the license isn’t granted by checking boxes in a standardized form, the authorities will carefully review the applicant, conduct interviews and further investigation, before delivering the crypto authorization in Portugal.

Governmental Statements on Crypto in Portugal

The website of the Banco de Portugal gives a concrete understanding of its role and position regarding virtual currency businesses. It defines its duties on this webpage as being “the competent authority in registering and verifying compliance with the applicable legal and regulatory provisions governing the prevention of money laundering and terrorist financing (ML/TF), by the entities that carry out any of the following activities involving virtual assets”.

This statement shows Portugal’s recognition of crypto and its industry, and a willingness to develop a comprehensive framework that would allow both the regulator and the actors of the market to work together.

It also clarifies what falls into the competence of the Banco de Portugal, and what requires the validation of other governmental bodies, the responsibility of the national central bank “not covering other domains of a prudential, banking conduct or any other nature”.

Incorporating a limited liability company for a cryptocurrency business in Portugal is an important part of the process. To apply for the crypto license, creating the company in Portugal means building the actual basis and place of operation of the project.

A limited liability company in Portugal (Lda, or Limitada) requires at least 2 shareholders and a minimum share capital of 5.000 EUR (it is advised for crypto projects to register an authorized capital above this amount).

The establishment of such a legal entity takes 3 to 4 business weeks but isn’t the only element of the process for a crypto company. The Portuguese license can only be granted to companies whose actual place of business is within Portugal. Concretely speaking, this means that the company should then rent or own a physical office space, and appoint domestic personnel.

Among the personnel should be appointed a senior management member, responsible for “overseeing compliance with the regulatory framework on the prevention of money laundering and terrorist financing”, a so-called AML officer or Money Launder Reporting Officer (MLRO).

The taxation of cryptocurrency companies’ activities in Portugal is mainly levied through different taxes:

• The corporate income tax;
• The dividends tax;
• The social taxes for on site workers.

At time of writing the standard corporate income tax in Portugal is a rate of 21%, except in the autonomous regions of Madeira and the Azores (14,7%). A reduced rate applies on the first taxable 50,000 EUR for small and medium businesses (17% inland and 11,9% in Madeira and the Azores).

The standard dividends tax rate is 25%. Social security taxes levied on the salary of Portuguese workers has a rate of 23,75% (based on the gross remuneration of the employee).

Crypto companies in Portugal are obligated to apply the AML-CFT laws at all times. The due implementation of the anti money laundering and counter financing of terrorism measures as described in the official texts is the condition to receive a crypto license in Portugal.

The Portuguese AML-CFT law defines four main principles to follow, in terms of obligations for crypto businesses in Portugal:

• Obligation to notify, to monitor and report any transactions or operations deemed suspicious or whose amount and emitter or receiver qualifies it as being reportable;
• Obligation to cooperate, with the regulator and any official authorities and institutions;
• Non-disclosure obligation, meaning that information regarding AML-KYC cannot be disclosed to customers and that the obliged entity preserves the relevant information;
• Examination and non-participation obligations, when ownership acts are at stake.

The laws regulating crypto in Portugal have to be respected at all times by actors of the crypto industry in Portugal, otherwise they may be sanctioned or see their authorization revoked.

Fines going from 2.500 EUR to 5.000.000 EUR can penalize crypto businesses failing to respond to the obligations. These fines apply to the legal entity in most cases, but wrongful doings of a specific individual within the organization can also lead to individual sanctions.

The Banco de Portugal can also, by law, prohibit the conduction of certain crypto activities during a given period of time, or indefinitely. It can also ban an individual from participating in a managerial position, if this person has been found guilty of misdemeanor.