Adam Tracy (Adam S. Tracy) On Starting An Offshore Crypto Broker-Dealer
Cryptocurrency and offshore attorney Adam S. Tracy explains the options for creating a licensed offshore cryptocurrency broker-dealer.
So I’ve been getting more and more requests about the possibility of obtaining a securities broker license for cryptocurrency — Bitcoin and the like. And taking away the fact that in March there was a reaffirmation that all digital currencies, so think about your Bitcoin, Bitcoin cash, Etherium, were in fact, commodities, it seems extremely difficult to sort of breakthrough in the traditional securities broker dealer market to perhaps say, you know, offer ICO tokens or something like that. Right?
And, without running through the imaginations of what you have to do to become a licensed broker dealer in United States, it’s pretty intensive, right? You can buy them off the shelf. It’s a little easier, but you need, you know, the requisite licensure. In turn, if you wanted to organically create one, there’s registration with the SEC. There’s registration with your SRO. There’s affiliating with a clearing firm, which is going to be very difficult, especially considering what you’re dealing with crypto, if that’s the model. Uh, you have to join the SIPC, and there’s a whole realm of protocols, which I won’t get into here because it’s really probably not likely that one would pursue it, without having an existing broker-dealer model in place and having the requisite licensure.
So that brings us to, obviously, offshore and the question becomes what is an ideal location for an offshore securities dealer? And the the obvious place has always been Vanuatu. And Vanuatu is an island, uh to the extent you don’t know, that is over by Australia somewhere around there. But it has a very streamlined approach to obtaining a securities dealer license, and that Securities dealer license goes farther than just traditional products, but also includes what are really commodities.
So what you’ll see is a lot of your Forex, a lot of your binary options dealers, are registered in Vanuatu. And the process can take about six weeks, which is, you know, by offshore standards pretty quick. Your main cost is a security bond or a fidelity bond in the amount of $50,000 which depending on credit cost you about $3,000 US, and the process of the application costs about $500.
So it’s exceedingly easy. I’ve been through it, the process, in terms of like turn around, and what you have to provide them is far less than what you find in most applications for money transmitter licenses, like in the event that you wanted to go sort of the crypto route for crypto exchange. But Vanuatu is the place to go, and it gives you full authority under the laws of Vanuatu to deal in securities, deal in commodities, dealing in Forex, dealing really whatever you will.
Obviously as a United States citizen you have to be cognizant and wary of the interpretation of US laws and how you may or may not solicit US customers, but, you know, being outside the United States, if you in fact are, then you don’t necessarily have the same concerns that a resident of the US would. But, it’s a valid license. It’ss recognized by a great number of nations, especially in Asia, Australia, and other similar developments.
So, it’s definitely the place to go, and I think when you’re looking at, you know, the uphill climb that you face domestically to create a broker-dealer, you know, there could be significant value to it, there’s near impossibility in clearing penny stocks these days. So to suggest that you’re going to clear some sort of ICO token is really, you know, you’re really grasping, right? Especially when you consider that you have to register with the SEC and FINRA, in order to operate.
So, I think that’s a bit remote. I’m not saying it’s impossible, not saying you can’t do it, but it’s a bit difficult. So, you know, if you’re going the offshore route, there’s only one place, you know, and it’s really unbeatable. You look at Seychelles, you look at Cypress, you look at Malta, they have some options. They’re good. They’re strong. They’re as not good, and they’re not as cost-effective, and they’re not as timely as Vanuatu. So I would definitely check it out. If you have questions, be sure to hit me up. My contact information is below. I’m Adam Tracy. I’ll talk to you next time.
A former competitive rugby player, serial entrepreneur and, trader attorney, Adam S. Tracy offers over 17 years of progressive legal and compliance experience in the areas of corporate, commodities, cryptocurrency, litigation, payments and securities law. Adam’s experience ranges from commodities trader for oil giant BP, initial public offerings, M&A, to initial coin offerings, having represented both startups to NASDAQ-listed entities. As an early Bitcoin adapter, Adam has promoted growth of cryptocurrency and offers a unique approach to representing crypto-clients. Based in Chicago, IL, Adam graduated from the University of Notre Dame with dual degrees in Finance and Computer Applications and would later obtain his J.D. and M.B.A. from DePaul University. Adam lives outside Chicago with his six animals, which is illegal where he lives.