In the most active cryptocurrency region in the world, the incremental scale is the underlying logic behind Stripe's acquisition of Bridge because of the free exchange and circulation of fiat currency and stablecoins, and even the settlement of daily consumption scenarios.
Written by: Sima Cong AI Channel
What really connects the general public and cryptocurrency is not computer technology, but financial institutions, and the essence is regulation.
The cause of the incident and personal conclusion
Both Stripe and Bridge are currently entering the red ocean;
Technology itself is not the core moat, and the consideration for mergers and acquisitions is "reconstruction costs";
The core stablecoin itself needs to be "stable". For example, the latest investigation of Tether caused uncertainty. The essence is that stablecoins need to be regulated and certified.
Bridge has yet to obtain regulatory approval in the entire United States, let alone the world;
One thing we cannot ignore is that even the legal tender of various countries is not necessarily the same as the rest of the world, such as the current Russian ruble;
Another point is the financial exchange and circulation regulatory policies of various countries, such as China’s annual total control (50,000 US dollars);
Which link is the most critical: Currently, the most common solution is the issuance of encrypted bank cards. Centralized exchanges or wallet companies usually cooperate with card organizations such as Visa and Mastercard to issue encrypted debit cards/credit cards. As long as users hold cryptocurrencies in their platform accounts, they can use debit cards/credit cards for online consumption or offline card swiping. In actual payment, the card issuing company will first convert the cryptocurrency into local legal currency through the withdrawal payment channel, and then pay it to the merchant.
Especially in the daily consumption field and inter-enterprise and cross-border settlement links, the legal recognition and use of stablecoins are the core incremental market;
So the core logic is: in the most active cryptocurrency regions in the world, due to the free exchange and circulation of fiat currency and stablecoins, and even the settlement of daily consumption scenarios, this incremental scale is the underlying logic of Stripe's acquisition of Bridge;
Stripe spends $1.1 billion to acquire Bridge.
Stripe, one of the three largest payment giants in the United States, finally made a big bet after a frantic attempt to use Pay with Crypto this year. It acquired Bridge.xyz, a stablecoin API company that was only established two years ago, for $1.1 billion, creating the largest acquisition deal in the crypto industry.
Founded by entrepreneurs Sean Yu and Zach Abrams, Bridge is a stablecoin API engine that provides software tools that help companies accept stablecoin payments. The two founders previously sold Venmo competitor Evenly to Block in 2013; Abrams is also a former senior employee of Coinbase.
Bridge's Orchestration API is an API that integrates stablecoin payments into Web2 companies' existing businesses. Bridge handles all compliance, regulatory and technical complexities.
Bridge's Issuance API can help users issue their own stablecoins and provide an investment option of 5% of US Treasury bonds to improve capital utilization.
This set of APIs, combined with Bridge's own 1) stablecoin cross-chain transactions, 2) fiat currency/cryptocurrency deposit and withdrawal acceptance, and 3) virtual bank accounts (Virtual Bank Accounts) provided by Leed Bank, can help Web2 users use stablecoin payments more conveniently, and the user experience is smoother and more seamless.
Bridge says that using its API, funds can be transferred globally in minutes, stablecoin payments can be sent seamlessly, local fiat currencies can be converted into stablecoins, and US dollar and euro accounts can be provided to consumers and businesses around the world, allowing users to save and spend in US dollars and euros.
According to Fortune, SpaceX uses Bridge to collect payments in different currencies in different jurisdictions and transfer them to its global treasury via stablecoins.
Bridge has also established partnerships with crypto companies such as blockchain network Stellar and Bitcoin payment application Strike to provide infrastructure for their own stablecoin payment functions. In addition, Coinbase has also adopted Bridge's services to support transfers between Tether on Tron and USDC on Base. According to statistics, Bridge has processed more than $5 billion in annual payments.
Stripe is currently just a payment gateway and must rely on networks like Visa/Mastercard: –– Charges about 1-3% extra –– Relies on banks/local partners –– Low authorization rate stablecoins can cut out all the middlemen and thus own the stack.
“If there is only one stablecoin on a single blockchain, then there is no need for Bridge to exist. The value of Bridge is to allow developers to seamlessly convert between fiat and stablecoins and flow between different blockchains.”
This technology itself is not a core moat and the threshold is not high.
Bridge is also licensed in 48 states and holds a VASP license from Poland, and is currently applying for further licenses in New York and Europe.
Competitors are all old-fashioned killers in the red ocean
The PYUSD stablecoin launched by Paypal on August 7, 2023, as the only stablecoin supported in the PayPal ecosystem, will be used to connect Paypal's existing 431 million users and provide a seamless bridge between fiat currency and cryptocurrency for Web2 consumers, merchants and developers.
Paypal has completed the framework layout for Web3 payments by opening up payment channels between legal currency and cryptocurrency, issuing stablecoins as a medium of transaction, and building a Paypal account wallet system, which can form a logical closed loop in its own ecosystem.
MetaMask launched its latest feature “Sell” on September 5, allowing users to convert cryptocurrencies into fiat currencies through MetaMask Portfolio and send funds to bank accounts. For compliance purposes, this feature is currently limited to the United States, the United Kingdom, and parts of Europe, and only supports the exchange of US dollars, euros, and pounds.
MoonPay is currently the leading project for cryptocurrency deposits and withdrawals, with more than 5 million registered users. In terms of coverage, MoonPay supports crypto payments in more than 160 countries and regions, and supports the exchange of more than 80 cryptocurrencies and more than 30 legal currencies. In terms of payment methods, MoonPay currently supports payment through credit and debit cards, mobile payments, account-to-account payments and other channels. Uniswap has previously also used Moonpay as one of its deposit channels.
Introduction: Due to the surge in trading volume
In the second quarter of 2024, which ended on June 30, $8.5 trillion was traded across 1.1 billion transactions. During the same period, stablecoin trading volume was more than double Visa’s $3.9 trillion.
Stablecoins account for nearly a third of daily cryptocurrency usage, at 32%, second only to decentralized finance, or DeFi, measured by share of daily active addresses, at 34%.
On June 20, 2024, the total trading volume of the entire cryptocurrency market was $74.391 billion, and stablecoins accounted for 60.13%, or about $44.71 billion. Among them, USDT (Tether) is the most used, with a market value of $112.24 billion, accounting for 69.5% of the total value of all stablecoins. On June 20, USDT's trading volume reached $34.84 billion, accounting for 46.85% of the total trading volume that day.
As Rep. Ritchie Torres (D-N.Y.) wrote in a September op-ed for the New York Daily News, the proliferation of dollar-denominated stablecoins — made possible by the ubiquity of smartphones and the cryptographic technology of blockchain — could become humanity’s greatest experiment in financial empowerment ever.
The average cost of sending USDC on Coinbase’s popular L2 network Base is less than a cent.
Background: Introduction to the origin and evolution of human currency and financial institutions
Sequence: First there is currency, then there are banks and other financial institutions, and then there are various payment methods and tools.
The money changers in ancient Babylon, Greece, and Rome can be seen as various types of U-merchants today, and the popularization of technologies such as online banking and mobile payments in the cryptocurrency world, especially the free, fast, and low-fee exchange and remittance and withdrawal between fiat currency and cryptocurrency, are the key to building the "circulation" of cryptocurrency infrastructure.
1. The Origin of Currency
The origin of money is closely related to human economic activities. As commodity exchange became more complex, the earliest form of barter exposed some defects, such as mismatched needs between the two parties and difficulty in measuring items. In order to solve these problems, people gradually looked for a medium of exchange, and thus money came into being.
1. Early forms of currency
Barter currency: The earliest form of currency was the use of items with intrinsic value as a medium of exchange, such as shells, livestock, and grain.
Metal currency: With the development of social economy, precious metals (such as gold, silver, and copper) have gradually become the main form of currency due to their scarcity, durability, and portability. Ancient civilizations such as China, Greece, and Rome all used metal currency.
2. The Origin of Paper Money
China's paper money: The earliest paper money in the world appeared in China's Tang Dynasty, "Fei Qian", while the "Jiao Zi" in the Song Dynasty was the earliest official paper money. This marks the transition of human currency from physical objects to credit currency.
Modern paper money: With the development of the banking system, countries began to issue paper money backed by national credit, gradually replacing metal currency circulation.
2. The Emergence and Evolution of Financial Institutions
The emergence and development of financial institutions are closely related to the complexity of human economic activities and the demand for fund management and circulation.
1. Early financial institutions
The prototype of ancient banks: The prototype of early financial institutions can be traced back to the money changers in ancient Babylon, Greece and Rome. They helped people exchange money and keep their wealth, which became the basis of the earliest banking business.
Italian Medieval Banks: The true origins of modern banks can be traced back to Florence, Venice and Genoa in medieval Italy. These cities established the earliest private banks, providing deposit, loan and exchange services.
2. The birth of central banks
Swedish Central Bank: The world's first central bank was Sweden's Sveriges Riksbank, which was established in 1668. It is a government-controlled institution responsible for regulating the money supply and stabilizing the economy.
Bank of England: In 1694, the Bank of England was established in the UK, becoming the world's earliest modern central bank. It assumed the functions of issuing banknotes and government lending, and gradually developed into the core of the country's financial system.
3. Development of a modern financial system
The rise of financial markets: With the advancement of the Industrial Revolution, capital markets developed rapidly, especially in the 19th century, when stock and bond markets began to become the core of the economy. Financial centers such as London, Paris, and New York became hubs for global capital flows.
Separation of Commercial and Investment Banks: In the early 20th century, with the specialization of economic activities, commercial banks (mainly providing deposits and loans) and investment banks (mainly providing capital market services) gradually separated.
Globalization and the modern financial system: With the development of globalization, transnational financial institutions and international financial markets have risen rapidly. New financial instruments and technologies such as financial derivatives, electronic payments, and cryptocurrencies have emerged, changing the structure of the traditional financial system.
III. Future Development of Monetary and Financial Institutions
Entering the 21st century, with the development of technology, monetary and financial institutions are undergoing rapid changes:
Digital currency and cryptocurrency: The emergence of decentralized digital currencies such as Bitcoin challenges the traditional monetary system. Central banks of various countries have also begun to develop central bank digital currencies (CBDCs) to try to digitize the functions of paper money.
Financial Technology (FinTech): The rise of financial technology has made financial services more convenient. Innovative models such as online banking, mobile payments, and P2P loans have changed people's financial behavior.
Global Financial Governance: With the interconnection of international financial markets, international financial institutions (such as the International Monetary Fund and the World Bank) are playing an increasingly important role in global financial governance.
3.1. Current status of fiat currency and stablecoin exchange
The Bank for International Settlements believes that digital stablecoins can be defined as encrypted digital currencies whose purpose is to maintain a stable value relative to a specific asset or a basket of assets. Stablecoins are token-based; their validity is verified based on the token itself, rather than on the identity of the counterparty, that is, account-based payments.
Stablecoins are in the same field as Bitcoin and other cryptocurrencies because they are electronic currencies that can be traded peer-to-peer and do not require clearing by the central bank. In addition, it should be noted that digital stablecoins refer to cryptocurrencies with cryptographic features such as anonymity, decentralization, and immutability that maintain stable value through price mechanisms. Recently, the G7, IMF, and BIS have set up a working group specifically responsible for stablecoin-related businesses, calling digital currencies launched by technology or financial institutions, based on existing large and/or cross-border customers, and likely to be used globally global digital stablecoins. Digital legal stablecoins refer to digital stablecoins based on legal currency collateral.
There are two types of price stabilization mechanisms for digital stablecoins: one is based on algorithms; the other is based on collateral. The first is that the algorithm-based digital stablecoin does not have any assets as endorsement, but only uses algorithms to adjust the supply and demand balance according to the current price of the stablecoin, thereby maintaining the exchange rate of the stablecoin. For example, Basis is benchmarked against 1 US dollar to adjust supply and demand. The second is the digital stablecoin based on collateral guarantee, which uses assets such as legal currency, gold, and digital assets as collateral for the stabilization mechanism. Its stabilization mechanism has higher certainty than the former.
Digital stablecoins first appeared in July 2014. Tether, a company established by Bitfinex, a world-renowned cryptocurrency trading platform, issued USDT, which is pegged to the US dollar at a 1:1 ratio. Tether promised that the USDT in circulation is 100% backed by US dollar deposits and has passed third-party audits. Tether was originally designed for people who cannot directly use US dollars for digital currency transactions. Since China cleared digital currency exchanges in 2017, Chinese digital currency users have become one of the most important user groups of USDT.
The top two are USDT and USDC.
The customer remits USD to Tether's bank account. After Tether confirms receipt of the corresponding funds, it transfers USDT equal to the USD amount from Tether's core wallet to the customer's wallet. This is the issuance of USDT. If the customer wishes to redeem USD, after the USDT held by the customer is transferred to Tether's core wallet and the handling fee is paid, Tether will remit USD equal to the USDT amount to the customer's bank account and destroy the corresponding amount of USDT.
Once Tether enters circulation, any company or individual can trade it freely.
Tether Limited issues all USDT through the Omni Layer protocol. Omni runs on top of the Bitcoin blockchain, so all issuance, redemption, and existing USDT, including transaction history, can be publicly audited through tools provided by Omnichest.info.
3.2. Process of purchasing cryptocurrency
The most common and accepted payment methods for buying cryptocurrencies include: credit cards, bank transfers, and even cash. Different websites accept different payment methods, so you need to choose a website that accepts the payment method you want to use.
Not all cryptocurrencies can be purchased on every website. You will have to find a website that sells the cryptocurrency you wish to purchase.
Each website has different fees. Some are cheap, and some are not so cheap. Before you set up an account on any website, make sure you know how much it costs.
A cryptocurrency wallet is where you store your cryptocurrencies after you purchase them. You can compare a cryptocurrency wallet to your bank account. Just like you store traditional currencies (USD, JPY, EUR, etc.) in your bank account, you also store your cryptocurrencies in a crypto wallet.
There are many easy-to-use and secure options to choose from. It is important to choose a highly secure wallet because if the cryptocurrency in your wallet is stolen, you will never be able to get it back.
There are three types of wallets:
Online wallets: quickest to set up (but also least secure);
Software wallets: applications you download (more secure than online wallets);
Hardware wallet: A portable device that you plug into your computer via USB (the most secure option).
The wallet you need will depend on the cryptocurrency you want to purchase.
Cryptocurrency exchanges are online websites that allow you to convert your local currency into cryptocurrency. Exchanges are the most popular way to buy cryptocurrency.
Most exchanges accept payments via bank transfer or credit card, and some of them also accept payments via PayPal.
Once you have your account set up, you can start buying cryptocurrencies on exchanges. Most exchanges are like stock trading platforms: you can buy and hold your cryptocurrencies, or you can exchange them for another cryptocurrency.
3.3. Complete process of deposit and withdrawal
In the world of cryptocurrency, withdrawing funds safely is a skill that every investor must master. As the cryptocurrency market continues to develop, the withdrawal processes of major trading platforms are also constantly changing. It is crucial to understand how to withdraw funds safely and efficiently.
Withdrawal Methods
1. Bank transfer: This is the most common withdrawal method, which is done by converting cryptocurrencies into fiat currency and then transferring it to a bank account. Most exchanges support this function.
2. E-wallet withdrawal: Use e-wallets (such as PayPal, Skrill) to withdraw cryptocurrencies to fiat currency. This method is usually faster.
3. P2P Trading: Withdraw through a P2P platform, you can trade directly with other users, sell your cryptocurrency to them and receive fiat currency.
Withdrawal Fees
The fees charged by different platforms may vary. They usually include a fixed fee and a fee that is a percentage of the transaction amount. Understand the fee standards of each platform and use the following tips to reduce the fees:
1. Choose a withdrawal method with lower fees.
2. Reduce the cost of a single transaction by withdrawing large amounts.
Use of external service providers
Exchange service introduction: Cryptocurrencies can be exchanged for a variety of fiat currencies (such as USD, EUR) through external service providers or OTC exchanges. These services usually offer better exchange rates.
Advantages and disadvantages analysis: The advantages of external service providers are flexibility and diversity, but there may be certain fees and risks.
Cross-border withdrawal strategy
Currency conversion path: Choose the best currency conversion path to reduce exchange rate losses and fees. For example, convert funds into major currencies first and then convert them into the target currency.
Use of P2P platforms: Multi-currency transactions through P2P platforms can increase flexibility, but you need to pay attention to the reputation of your counterparties.
KYC/AML Policy
KYC/AML Policy Explanation: KYC (Know Your Customer) and AML (Anti-Money Laundering) policies require users to provide personal information and certification to ensure compliance and avoid account freezes.
Avoid account freeze: Follow the platform’s KYC/AML policy and ensure your account information is complete and accurate.
Potential Problems
In the virtual currency market, the process of converting cryptocurrency into fiat currency (i.e., “withdrawal”) is often accompanied by various risks, including high fees, complicated processes, and potential legal issues.
IV. Current Status of Free Convertibility
1. USDT bank card
The core idea is to use the price stability of USDT to provide users with a stable and convenient means of payment.
Cryptocurrency bank card fees are often higher than centralized exchanges because users need to pay additional exchange fees to payment network providers. Users use cryptocurrencies to pay merchants for goods and services denominated in fiat currency through crypto debit cards, so crypto debit cards can only be used as a fiat withdrawal channel. It should be noted that using crypto debit cards to pay will incur capital gains tax, and cryptocurrencies must be pre-deposited in the card before use.
USDT bank cards allow users to make payments worldwide without exchanging currencies. Real-world usage scenarios for users include cross-border shopping, travel spending, and online subscription services. For example, a Chinese user can use a U card to purchase goods on an American e-commerce platform, avoiding complicated foreign exchange conversions and high fees. Another scenario is to use a U card to pay hotel and restaurant bills when traveling abroad without worrying about the impact of exchange rate fluctuations. In addition, users can also use U cards to pay for subscriptions to international services such as Netflix, avoiding bank card rejections or high fees. The fees throughout the process, such as foreign exchange conversion fees, service fees, etc., will be clearly displayed before the user pays.
There are currently a variety of virtual currency bank cards on the market that offer USDT payment functions, such as Binance Card, Crypto.com Card, Wirex Card, etc. These cards usually work with Visa or MasterCard, allowing users to use them anywhere in the world that accepts these payment networks.
Common U card issuance modes are:
Direct issuance by banks. Some traditional banks have begun to get involved in the cryptocurrency field and directly issue U cards. These banks use their own payment networks and compliance frameworks to provide users with stable cryptocurrency payment solutions. For example, Germany's Fidor Bank has entered the cryptocurrency field by directly issuing U cards. These banks use their own payment networks and compliance frameworks to provide users with stable cryptocurrency payment solutions.
Banks work with third-party companies to issue. Some banks work with cryptocurrency companies and use the technology and expertise of third-party companies to issue U cards. In this model, banks provide traditional financial infrastructure, while third-party companies are responsible for the management and conversion of cryptocurrencies. For example, in the Asia-Pacific region, Mastercard has partnered with Amber Group, Bitkub, and CoinJar to launch cryptocurrency payment cards, allowing users to spend cryptocurrencies globally.
Issued by third-party payment companies. Some companies focusing on cryptocurrency payments independently issue U cards by cooperating with payment networks such as Visa or MasterCard. These companies usually provide more flexible services and customized solutions to attract users with different needs. For example, Crypto.com and Wirex independently issue U cards by cooperating with Visa or MasterCard. These companies usually provide more flexible services and customized solutions to attract users with different needs.
SaaS model cooperative issuance. Third-party payment companies provide U card issuance platforms for channel merchants or other financial service providers through the SaaS (Software as a Service) model. This model allows other companies to quickly enter the cryptocurrency payment market, using existing technology and compliance frameworks to reduce development and operating costs. Third-party payment companies such as Bitmama provide U card issuance platforms for channel merchants or other financial service providers through the SaaS model.
2. Crypto ATM
As a physical machine, the operation and maintenance costs are higher, so the exchange fee is also high, some can even reach 20%. Crypto ATM merchants buy liquidity from third-party suppliers and transfer it to the user's self-hosted wallet, so they need a remittance license.
The biggest advantage of cryptocurrency ATMs is anonymity and privacy, because users can buy cryptocurrencies with cash, and there is usually no KYC process. Sometimes you need to provide an ID, but you don’t need proof of residence or facial recognition.
However, it supports only a few types of cryptocurrencies, basically only BTC and ETH. Most ATMs do not provide withdrawal services. Along with high handling fees, it is often called the dumbest way to buy cryptocurrencies.
3. Centralized Exchange CEX
Centralized exchanges are the most commonly used platforms for depositing and withdrawing fiat currencies. They have natural license advantages, low fees, and support a variety of currencies. They are also the largest liquidity providers in the ecosystem. Retail investors can freely deposit and withdraw funds through custodial wallets, while merchants mostly use API and SDK deployment to implement transactions and transfers. As a liquidity intermediary, centralized exchanges make profits through the spread between buying and selling liquidity and user fees.
When merchants and their customers use wallets hosted by the same exchange, there will be no fees for transactions, because the money is just transferred between different accounts in the same hosted wallet. However, if a self-hosted wallet is used for transfer, the corresponding blockchain network fee will be charged.
4. Deposit and Withdrawal Aggregator
Deposit and withdrawal aggregators, such as MetaMask's fiat deposit service, guide users to purchase and earn commissions by providing quotes from multiple independent deposit and withdrawal projects and centralized exchanges. This category is essentially just an information intermediary, which realizes liquidity profit sharing by aggregating multiple exchanges and matching transactions with independent deposit and withdrawal projects. Deposit and withdrawal aggregators have three main characteristics:
We only act as an intermediary to provide quotations, and all transactions are conducted through third-party suppliers.
No money transmitter license is required as users are authenticated through a third-party provider.
In addition to fiat currency deposits and withdrawals, it also provides DEX aggregators, liquidity staking, and NFT markets. The deposit and withdrawal aggregator is mainly for retail investors and does not provide payment solutions for merchants.
5. OTC Trading
Over-the-counter (OTC) fiat currency deposit and withdrawal projects allow buyers and sellers to trade directly and eliminate the middleman. They are also a high-risk area for fraud. There are two modes:
OTC counters, such as Kraken OTC. In the OTC counter model, the two parties to the transaction are the client who needs trading services and the OTC counter as the counterparty. This model has three main advantages for deposits and withdrawals:
No transaction slippage. By providing fixed quotes for large transactions, we avoid losses caused by slippage, take risks for customers, and get the possibility of making profits by trading better than the quoted price.
More liquidity. OTC desks can trade at the best price on multiple liquidity platforms.
High privacy. By trading directly with the OTC counter, customers can protect their privacy and avoid transaction information appearing in the public order book.
6.Customer-to-customer
That is C2C, such as OKX C2C Trading. This refers to direct transactions between individuals to conduct fiat currency deposit and withdrawal transactions without the need for intermediaries or third parties. OKX will hold the digital currency assets of the buyer/seller until receiving the receipt/payment confirmation from the other party. The platform will recommend users to trade with certified merchants, because all certified merchants have been carefully reviewed by OKX. The advantages of C2C are as follows:
Supports multiple payment methods. Buyers and sellers can define any payment method by themselves. The transaction can be completed as long as the user confirms the receipt/payment after the transaction actually occurs.
Low trust cost. Both parties to the transaction must first pass the platform's identity verification, or even more stringent merchant certification review. The platform will also disclose the user's transaction information to provide a credit value reference, but it cannot avoid the risk of some counterparties delaying or canceling orders.
High privacy. Banks in many countries (such as India) prohibit users from trading cryptocurrencies to avoid potential policy risks in the future. For C2C transactions, users can conceal the purpose of the transfer from the bank, thereby avoiding the bank's restrictions.
5. The essence is regulatory compliance
The unique innovation of cryptocurrencies makes it difficult to define their attributes. Most regions do not yet have a comprehensive regulatory framework. Currently, legal licenses related to deposits and withdrawals are divided into the following two categories:
Focusing on payment and currency circulation licenses, such as the US remittance license and the EU VASP; professional virtual asset service provider licenses, this category will be the trend in the future.
The scope of entities that can apply for a money transmission license (MTL) in the United States includes international remittances, foreign exchange conversion, currency transactions/transfers, ICO issuance, provision of prepaid items, issuance of traveler's checks, etc. It can be considered that all institutions related to money services are covered.
To apply for the license, deposit and withdrawal projects need to register as money service providers with the Financial Crimes Enforcement Network (FinCEN), and then apply for a money transmission license in the operating state. The application adopts a registration license system and needs to be reviewed every two years. Due to the vague nature of cryptocurrencies, deposit and withdrawal projects are more or less regulated by the U.S. Securities and Exchange Commission (SEC) or the Commodity Futures Trading Commission (CFTC).
Compared with the United States, the crypto regulatory systems in the European Union and the United Kingdom are more complete. Deposit and withdrawal projects need to register for a virtual asset service provider license (VASP). In addition, all exchanges, mining pools, wallet providers, custodians and decentralized applications need this license. Registering a virtual asset service provider license in one EU country allows you to conduct business throughout the EU.
Lithuania, a European Union country, has the most relaxed cryptocurrency regulatory policy in the EU. Licenses can be obtained as soon as one month, and the license has no expiration date. The minimum authorized capital is only 2,500 euros, and there are no requirements for local personnel structure. Many centralized service providers hold its licenses, such as Binance, BIT, Huobi, HyperBC, etc.
In Hong Kong, China, cryptocurrencies are divided into security tokens and non-security tokens, so the legal operation of virtual currencies in Hong Kong requires the application of dual licenses. According to different regulatory authorizations, the Hong Kong Securities and Futures Commission regulates the security token transactions conducted by virtual asset exchanges in accordance with the (Securities and Futures Ordinance) (License No. 1 + License No. 7); at the same time, it will also regulate the non-security token transactions conducted by virtual asset exchanges in accordance with the (Anti-Money Laundering Ordinance) (VASP license). On August 3, HashKey and OSL were approved by the Hong Kong Securities and Futures Commission to upgrade the No. 1 (Securities Trading) and No. 7 (Providing Automated Trading Services) licenses, and were allowed to engage in Hong Kong cryptocurrency retail business, becoming the first batch of institutions to obtain licenses since the new regulatory requirements for retail digital asset transactions in Hong Kong came into effect on June 1, 2023.
In countries or regions that have clearly introduced exchange regulatory policies, a license obtained by an institution means that it is under the supervision of the local government and can legally operate cryptocurrency business. Users can use legal currency payment methods to deposit funds, and asset and information security is highly protected. At the same time, the number and quality of licenses also reflect the confidence and determination of institutional exchanges to invest in the future. The current comprehensive strength of institutions and exchanges plays an important role in expanding their publicity effects and consolidating user confidence.
5.1. Detailed description of countries and regions that have introduced regulatory policies for cryptocurrency exchanges, fiat-cryptocurrency swaps and transactions, and stablecoins:
Detailed license types and regulatory requirements for cryptocurrencies in various regions, especially covering licenses for financial institutions, payment services, and fiat currency and cryptocurrency transactions:
Countries and regions such as the United States, the European Union, Singapore, Japan, and Switzerland have provided strict licenses and permits for cryptocurrency exchanges and payment services, covering the exchange of fiat currencies and cryptocurrencies, payment services, and wallet management.
AML (Anti-Money Laundering) and KYC (Know Your Customer) compliance is generally required in various countries, and in most regions, licensing and regular reporting to regulators are required.
Some regions (such as Switzerland, Dubai, and Singapore) are more open to crypto innovation, encouraging emerging financial technologies while providing compliance frameworks.
5.2. Detailed description of countries and regions that have introduced regulatory policies such as cryptocurrency licenses:
5.3. A table summarizing some countries and regions that have clearly withdrawn from cryptocurrency "license" supervision and their policy highlights:
5.4. The following is a summary of the types of exchange and payment support provided by some banks and financial institutions around the world for stablecoins, other cryptocurrencies and other digital currencies:
