Crypto License in Slovakia

The legality of cryptocurrency business in Slovakia

In Slovakia, cryptocurrency businesses enjoy a rather light framework. Virtual asset services are part of the Trade Licensing Act under entries 82a and 82b, “Provision of virtual currency exchange services” and “Providing virtual currency wallet services”. As such, a crypto company in Slovakia shall simply register for one or both of these activities as its trade.

Simply put: to become a Virtual Asset Services Provider in Slovakia, a company shall enter the trade registry, equating a crypto license.

It is important to note that these two activities, namely exchange services and wallet services, are the only permitted crypto activities in Slovakia, if operating under a single trade license. It is explicitly forbidden to a crypto licensed company in Slovakia to offer financial services pertaining to other regulations, such as:

• Banking services
• Electronic money institutions
• Payment service providers
• Investment of third parties’ funds
• Providing consumer loans
• Forex

The AML laws in Slovakia follow the FATF guidelines and EU directives. Slovakia’s domestic AML law, “Act on protection against money laundering and terrorist financing” issued in 2008 and amended lastly in 2020, compiles the rules and requirements that apply to crypto businesses in Slovakia: KYC and client due diligence, transaction monitoring and reporting, etc.

We can therefore summarize the legality of cryptocurrency business in Slovakia by the need to respect the following requirements:

• To follow the FATF/EU AML-KYC standards as laid out in the Slovak AML law
• To register as one or both of the trades pertaining to virtual currencies
• To not provide services relevant to other regulations (e.g. payment services)

Cryptocurrency regulation in Slovakia

There are no specific regulations in Slovakia dedicated to crypto. Virtual assets are not considered legal tender, which means that trading and issuing crypto in Slovakia doesn’t fall under a dedicated law text.

The National Bank of Slovakia seems to follow the lead of its neighboring country with which it has close ties: Czech Republic. The Trade Licensing Act in force in Slovakia is actually derived from the 1991 document issued in former Czechoslovakia, explaining partly the similarities between these two licensing frameworks.

The main regulation to acknowledge, for crypto companies in Slovakia, is obviously the AML-KYC law, officially the “Act on protection against money laundering and terrorist financing”. Though it is widely derived from the EU directives, this single document encompasses everything a crypto business has to comply with in order to legally operate in Slovakia.

Slovakia Virtual Cryptocurrency Registry

Virtual Asset Services Providers (VASP) in Slovakia are licensed by the branch of the Ministry of Interior responsible for registering companies engaged in a trade.

In Slovak law, a trade is “a continuous activity operated independently, in one’s own name, on one’s own responsibility, for the purpose of achieving a profit or for the purpose of achieving a measurable positive social impact […]”.

This register is public, though it does not list companies having registered for a specific trade. Therefore, it is possible to check if a company is licensed as a provider of virtual currency services in Slovakia, but not to list them all from a single request.

As a crypto business registers itself in the Trade Register of Slovakia, as a provider of virtual currency services, it becomes a licensed crypto company.

Crypto-authorization process in the Slovakia Virtual Currency Registry

The crypto authorization process in Slovakia is simple and straightforward. It usually doesn’t take more than 2 months to get a new project standing on its legs as a crypto licensed company in Slovakia.

The applicant to a Slovakia crypto license has to focus its attention on completing the requirements one by one. The key elements are setting up the legal entity in the form of a limited liability company, to prepare policies and documents to comply with the AML-KYC law of Slovakia and to apply for a trade license pertaining to the virtual currency services.

The process entails communicating with the authorities of Slovakia to properly sort out the compliance requirements and validate the business model of the crypto company. It also requires appointing a person responsible for “ensuring the fulfilment of tasks in the protection against money laundering and terrorist financing, reporting unusual business operations, and providing ongoing liaison with the financial intelligence unit”. Commonly referred to as the AML officer or Money Laundering Reporting Officer, this position doesn’t have an official name in Slovakia.

The registration of Slovakia Company in Register of crypto currency companies

Registering a Slovak company in the register of crypto currency companies is a process in 5 stages:

• Incorporation of a limited liability company in the Slovakia
• Appointment of a responsible person for ensuring the AML-KYC tasks
• Drafting of the AML-KYC required  documents
• Application to the Trade Register
• Opening of a corporate account in an EMI

First, a limited liability company (s.r.o) shall be formed in Slovakia. Any LLC in Slovakia has to pay upfront its minimum share capital, which is set to 5.000 EUR by law. There are no residency requirements for the director and shareholders of the company.

Appointing a person responsible for implementing AML-KYC measures, monitoring and reporting unusual transactions, is required and critical to the success of the application. This person also does not need to be a resident of Slovakia.

In accordance with the AML laws of Slovakia, a set of AML and KYC policies and documents need to be drafted. These policies will help design the business activity in a way that is compliant with the Slovak regulations, and to make the routine work of the AML-KYC responsible person more codified and therefore less error-prone.

The application is then ready to be carried out to the Trade Register. A Slovak crypto business can register for two activities pertaining to virtual currencies: exchange services and wallet services.

Finally, once everything is ready, the Slovak licensed crypto company can open a corporate account within a European Electronic Money Institution and start providing its services.

Governmental Statements on Crypto in Slovakia

The Government of Slovakia did not express itself officially on the matter of cryptocurrency.

Slovakia is a good example of a pro-crypto country, who sorted out a simple regulation in order to enable crypto companies. Simultaneously, it implements compliance rules that are up to date with the international standards, as set by supranational organizations like the FATF and the European Union. Subsequently, the framework is trustable for customers of crypto companies.

The future of the crypto license in Slovakia is tied to the application of the MiCA decree in Europe. This regulation, “Markets in Crypto Assets”, has been voted at the European level and will be applied progressively by member states of the EU, including Slovakia. There hasn’t been any information provided regarding the enforcement of MiCA in Slovakia.

Requirements for companies engaged in crypto activities in Slovakia

A company engaged in crypto activities in Slovakia shall respond to certain requirements before applying for the VASP license in Slovakia.

Successfully registering as a crypto company in the Licensed Trade Register of Slovakia allows a company to conduct crypto activities, as long as they stay in line with the imperatives described by law.

These requirements include:

• Provision of an Apostilled/notarized ID and a proof of non-criminal record from all participants;
• Demonstration of competence, knowledge and/or experience from participants;
• Internal procedures compliant with the AML laws;
• AML policies and training material for every employee;
• Staff training at least once per calendar year;
• Appointment of an responsible person (AML officer) and a director, without requirement to reside within Slovakia.

The process of setting up a company for a cryptocurrency business in Slovakia

Incorporating a company for a cryptocurrency business in Slovakia is simple. The process is performed remotely through a Power of Attorney and takes 2 to 3 weeks.

The participants shall simply choose a company name, a description of the intended activity and provide a certified passport scan.

During incorporation, the authorized minimum share capital of 5.000 EUR shall be paid up.

The company is then registered and good to undertake the next steps, in order to secure the crypto license in Slovakia.

Taxation for cryptocurrency companies in Slovakia

Cryptocurrency companies in Slovakia are taxed on their corporate profits at a rate of 21%. If the revenue is inferior to 49.790 EUR in a year, the cryptocurrency company will benefit from a reduced rate of 15%.

Dividend payments from a cryptocurrency company in Slovakia are taxed at 19%, but can be as low as 7% in certain cases. Note that for payments to tax residents of non-cooperative jurisdictions, an inflated rate of 35% applies.

Obligations for crypto companies in Slovakia

Every crypto company in Slovakia, before and after registering as a crypto licensed entity, must comply with the Slovak AML law. This comprehensive 30-pager provides a synthesis of the risk assessment, the due diligence and other measures to be applied at all times and in certain circumstances by the VASP in Slovakia.

In the daily life of a Slovak crypto business, this means that the individual responsible for implementation and enforcement of the AML laws has to make sure that KYC/KYB is properly conducted, to monitor transactions and report suspicious activity, depending on a risk assessment grid that is defined by law.

The AML officer must have a clear framework telling him what to do (including through AML and KYC systems and softwares) in different cases, such as for example:

• If the client is a legal entity from Moldova;
• If a client with a small amount of money on his account suddenly receives and transfers a big sum;
• If the client is a natural person from Finland who happens to be a family member of a government official.

Sanctions for violating Slovakia crypto-business obligations

The Slovak AML law specifies the planned sanctions in case of a breach of the obligations applying to a crypto business.

Small infringements such as violating the obligation of secrecy (not disclosing any information regarding monitoring and reporting) are sanctioned with a penalty of up to 3.319 EUR.

Failure to fulfill the duties of a crypto company in Slovakia can be punished by fines of up to 1.000.000 EUR and lead to the withdrawal of the license.

A penalty of up to 200.000 EUR can be imposed on a natural person if they are directly responsible for a breach or violation of the obligations.