Choosing a licensing regime: a comparison framework

Most licensing comparisons start with a table of state fees and minimum capital. That table is the least decision-relevant information available, because those are the two numbers that vary least in their impact on whether the business works.

The wrong question

“Which licence is cheapest and fastest” produces a predictable outcome: an inexpensive authorisation that your payment providers will not accept, in a jurisdiction your target market does not recognise, obtained quickly and useless slowly.

The right question is narrower and harder. Given the markets we intend to serve and the payment rails we need, which authorisations are acceptable to every party whose acceptance we require — and of those, which can we actually maintain?

Note the two halves. Acceptability is about the outside world. Maintainability is about you: whether you can staff the key function holders, meet the reporting cycle and fund the capital requirement on an ongoing rather than a one-off basis.

The order the decisions actually come in

1. Markets. Where will your customers be, in eighteen months rather than at launch? This is the only input that cannot be changed cheaply later.
2. Activity classification. What exactly are you doing, in the regulator's vocabulary? A single product often spans several defined services, and the classification determines everything downstream.
3. Payment rails. Which banks, acquirers and PSPs do you need, and which authorisations do they accept? Ask them before you apply, not after. This step is skipped in almost every project that goes wrong.
4. Candidate regimes. Only now does the shortlist appear — and it is usually short.
5. Maintainability. For each candidate: staffing, substance, reporting burden, ongoing capital.
6. Cost and time. Last, because by this point there are rarely more than two viable options.

A comparison framework

Score each candidate regime against these dimensions rather than against a fee table. The weightings differ by business; the dimensions do not.

Costs nobody puts in the table

• Key function holders. A compliance officer and an MLRO who are genuinely available and genuinely independent are a recurring salary cost, not a line item at application. Several regimes now prohibit combining these roles with operational management.
• Substance. Registered office, local director, in some regimes a physical office on a phased timetable. The Curaçao regime, for instance, requires a resident managing director from the day the licence is granted and phases in further key persons and premises over subsequent years.
• Audit and certification. Financial audit, compliance audit, and in gaming an independent systems review against the live environment.
• Reporting. Someone has to produce the returns. In a small firm that someone is usually a founder, and the cost is measured in attention rather than in fees.
• The second application. If the first regime turns out to be unacceptable to your payment partners, you pay for two. This is common enough to be worth pricing as a risk.

A worked example

A crypto exchange intending to serve retail customers across the EU, with card acquiring for fiat on-ramp.

• Markets: EU retail, so a passportable EU authorisation rather than a third-country regime.
• Classification: exchange of crypto-assets for funds and execution of orders — and, if an order book is operated, a trading platform, which changes the capital class and adds market abuse obligations.
• Rails: card acquiring for crypto purchase is the binding constraint. Acquirers have narrow appetite, and their requirements should be established before the member state is chosen.
• Candidates: CASP authorisation in a member state whose supervisor has processed comparable applications and whose banking environment serves authorised CASPs.
• Maintainability: own funds at the higher of the class minimum or a quarter of fixed overheads — which for a firm with real staff costs will exceed the headline figure — plus effective management in the member state and an EU-resident director.
• Only then does cost and timing enter, and by that point the choice is usually between two member states rather than twelve.

Next steps

See licensing for the regimes in detail, including capital thresholds, statutory review windows and refusal reasons, or send a description of the model and we will tell you which regimes are genuinely in scope.