Crypto License In Labuan

Labuan, a federal territory of Malaysia and home to the Labuan International Business and Financial Centre (Labuan IBFC), is one of Asia’s most attractive destinations for cryptocurrency and digital asset businesses. Under the supervision of the Labuan Financial Services Authority (Labuan FSA), the jurisdiction provides a regulated environment for crypto exchanges, brokers, payment operators, token issuers, and custody providers. A Labuan crypto license enables companies to operate internationally under clear rules on governance, security, and anti-money laundering, while enjoying low taxes and a strong reputation in the financial sector.

Advantages of the Labuan Crypto License

Labuan offers a well-structured legal framework that recognises various crypto-related activities, including exchange, brokerage, custody, and token issuance. Businesses can combine different license types within a single entity, allowing them to cover trading, payments, and digital asset operations efficiently. Licensing fees are competitive, ranging from USD 1,500 for a money-broking license to USD 30,000 for an investment bank license. The tax regime is appealing, with only three percent tax on net profits for companies that meet substance requirements, or a flat RM 20,000 annual tax. Licensed entities can serve global clients (excluding Malaysia’s domestic market) and deal in multiple fiat and digital currencies. The framework is anchored in the Labuan Financial Services and Securities Act 2010 and supplemented by specific guidelines for digital currencies.

Requirements of the Labuan Crypto License

To obtain a Labuan crypto license, a company must:

• Incorporate a Labuan company via a licensed trust company.
• Have fit and proper shareholders, directors, and officers with relevant financial or fintech experience.
• Meet minimum paid-up capital requirements: RM 500,000 for money broking; RM 300,000 plus USD 100,000 proof of funds for credit token; RM 500,000 for payment system; RM 10 million for investment bank or digital bank.
• Maintain a physical office in Labuan, employ at least two full-time staff, and spend RM 100,000 or more annually.
• Implement AML/CFT, cybersecurity, and risk management frameworks.
• Appoint a compliance officer responsible for ongoing regulatory reporting.
• Avoid prohibited assets such as privacy coins and algorithmic stablecoins.

Process and Timeline of the Labuan Crypto License

The licensing process generally follows these steps:

1. Pre-application consultation with Labuan FSA to define license scope.
2. Company incorporation (1–2 weeks).
3. Preparation of business plan, internal policies, capital proof, and due diligence documents (1–2 months).
4. Application submission and payment of fees.
5. FSA review, including fit-and-proper interviews with key personnel (3–5 months).
6. License issuance upon approval and fulfilment of conditions.

The overall timeline is typically four to six months.

Regulation Labuan

From 1 January 2025, the Admissibility Framework for Digital Currencies governs all crypto activities. Only licensed financial institutions can offer crypto services, and admissible assets include CBDCs, fiat-backed and crypto-backed stablecoins, and non-backed cryptocurrencies. Privacy coins and algorithmic stablecoins are prohibited. Operators must establish a Digital Currency Oversight Committee, conduct due diligence on listed assets, monitor risks, and provide transparent client disclosures. AML/CFT compliance, including the Travel Rule, is mandatory.

Accounting and Auditing in Labuan

Licensed crypto companies must keep proper records in Labuan, appoint an approved external auditor, and submit audited financial statements within six months of the financial year-end. They must maintain full transaction histories, KYC files, and operational logs for inspection. Client funds must be segregated from company funds, with withdrawals reported to the regulator within three working days.

Taxation in Labuan

Taxation is highly favourable: three percent corporate tax on audited net profits if substance requirements are met, or a flat RM 20,000 tax option. There is no tax on capital gains, dividends, or royalties, and no GST/VAT. More than seventy double taxation treaties help minimise cross-border tax exposure.

Crypto License in Labuan