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Set Up a Cryptocurrency Company in Luxembourg

Set Up a Cryptocurrency Company in Luxembourg

Updated on Tuesday 05th February 2019

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Set-up-a-cryptocurrency-company-in-LuxembourgLuxembourg is one of the best known financial centers in the world and financial technology has also started to become popular among investors setting up businesses here. The Luxembourg government also supports the development of new technologies in the financial field such as blockchain. This technology is employed to create cryptocurrencies which are now used by individuals who want to purchase products on the Internet, by e-commerce companies which accept digital money as a payment form, but also by investors who want to protect their assets. As a matter of fact, after the financial crisis, many wealthy individuals have tried to find other alternatives for keeping their investments safe which is why they decided to purchase cryptocurrencies.

Both local and foreign investors are welcome to open cryptocurrency companies in Luxembourg provided that they meet specific requirements imposed by the Company Law.

Our lawyers in Luxembourg can offer more information on the legal requirements related to opening a cryptocurrency company here. We can also assist with the procedure for registering a business which deals with cryptocurrencies in Luxembourg.

What do I need to open a cryptocurrency company in Luxembourg?

There are no specific requirements related to setting up a cryptocurrency business in Luxembourg, apart from the ones imposed under the Company Law and those imposed by the Luxembourg Financial Regulator, including the Anti-money Laundering regulations.

No matter if the business owner is a local or foreign investor, the following aspects must be considered:

  • -          the business form must match the activities of the cryptocurrency business;
  • -          the company must be registered with the Companies Register in Luxembourg, first;
  • -          obtain a payment institution license which also covers cryptocurrency-related activities;
  • -          obtain other licenses from different authorities, according to Luxembourg laws.

 

According to the EU legislation, Luxembourg cryptocurrency companies can also obtain EU electronic money institution licenses, based on the directive with the same name.

Our law firm in Luxembourg recommends both foreign and local entrepreneurs to set up private limited liability companies for undertaking cryptocurrency-related activities in the Grand Duchy.

The use of cryptocurrency in Luxembourg

Luxembourg is one of the countries which have facilitated the use of cryptocurrencies a few years back and recently the Financial Supervisory Authority in the Grand Duchy has announced its interest in having its own reserves of digital money. In the light of these new developments, opening a cryptocurrency in Luxembourg at this time seems a very good business opportunity for those interested in pursuing it.

Types of cryptocurrency businesses in Luxembourg

Foreign investors interested in stating cryptocurrency businesses in Luxembourg can set up various activities, among which:

  • -          cryptocurrency exchanges which are legal and subject to the payment institution license;
  • -          cryptocurrency mining activities which are do not require any type of license;
  • -          initial coin offerings which can be set up under the same regulations imposed on investment funds;
  • -          cryptocurrency ATMs which will also need to obtain payment institution licenses;
  • -          e-commerce companies which accept virtual coins as payment means;
  • -          crowdfunding companies through which money for launching ICOs can also be set up.

 

Our Luxembourg lawyers can help with the registration of any of the above-mentioned types of cryptocurrency companies.

How to open a cryptocurrency business in Luxembourg

The registration procedure of a cryptocurrency or blockchain business in Luxembourg goes the same way as for any other type of company. Once all the documents have been prepared and filed with the Commercial Register. Our law firm in Luxembourg can help with the company registration procedure. The company must also obtain the approval of the CSSF prior to starting the operations.

How to obtain an e-money payment institution license in Luxembourg

As mentioned above, the only license which can be obtained by Luxembourg cryptocurrency companies is the electronic money payment institution license at a national or EU level.

The company will be required to draft a business which will be submitted for verification and approval with the Luxembourg Financial Regulator. The plan must contain:

  • -          information about the types of activities to be conducted;
  • -          information about the cryptocurrency to be used;
  • -          information about the shareholders and managers of the company.

 

The Financial Authority will first review the documents and then issue the e-money payment institution license.

Taxation of cryptocurrency companies in Luxembourg

One of the most stringent problems of the Luxembourg government until a few years ago was related to the taxation of cryptocurrency activities. However, in 2018, the tax authorities have issued a circular in which the taxation of cryptocurrency mining and sale activities were regulated.

Under the new regulations, trading of cryptocurrencies will be treated as intangible assets, and thus they will not be subject to the income tax until they are disposed of. However, the taxation of income derived from cryptocurrency activities will be taxed only in the revenue generated is above 500 euros.

When it comes to the taxation of mining activities, these will be subject to the regular income tax, as it will enter the category of other taxable income.

Another good news is that cryptocurrency transactions are exempt from the VAT in Luxembourg.

It is best to ask for legal advice from our lawyers in Luxembourg in order to make sure you respect the taxation requirements imposed on cryptocurrency companies.

Why open a cryptocurrency business in Luxembourg?

Luxembourg is one of the most attractive financial centers in the world and the steps taken by the government towards regulating the use of virtual currencies attract many foreign investors. Digital tokens can be used for trading purposes in Luxembourg, as cryptocurrency exchanges are recognized in the Grand Duchy, a few such businesses already registering goods results on the local market.

An advantage of opening a Luxembourg cryptocurrency company is that many universities in the Grand Duchy are preparing students for working in the financial technology industry. Having a workforce qualified for operating in this sector will definitely have a positive impact on the development of blockchain technology.

If you want to start a cryptocurrency business in Luxembourg and need assistance, please feel free to contact us. If you are interested in exploring the cryptocurrency industry in Luxembourg, our local lawyers are art your disposal with complete information. You can also rely on us for assistance in setting up other types of companies in Luxembourg.