Labuan Money Broking License for Digital Financial Services (Virtual Currency Offering)

Overview:

Labuan, a Federal Territory of Malaysia, is an emerging regulatory hub for digital financial services, including virtual currency trading, derivatives, and forex operations, due to its progressive and business-friendly legal framework. Entities looking to offer virtual assets (e.g., Bitcoin, Ethereum) or related derivatives under a Money Broking License must adhere to specific regulatory, operational, and structural requirements.

License Suitability:

The Labuan Money Broking License with extension for Digital Financial Services (Virtual Assets) is ideal for firms intending to:

• Operate a Straight-Through Processing (STP) digital trading model.

• Offer spot exchange and derivative instruments based on virtual currencies and traditional currency pairs.

• Establish a regulated base for servicing international clients while enjoying low taxation and regulatory flexibility.

Key Licensing Requirements:

1. Incorporation:

• Incorporate a Labuan company (done after approval of the license application by the LFSA)

2. Experience Criteria:

• Directors and shareholders must demonstrate 3–5 years of experience in regulated financial services (e.g., FX, crypto exchanges, asset management, or derivative trading).

• Shareholders must be with verifiable financial and experience track records.

3. Capital Requirements:

• RM 1,500,000 (~USD 330,000) for businesses offering virtual currencies and derivatives thereof.

4. Local Presence:

• Minimum of two resident employees (can include outsourced roles).

• Registered office in Labuan.

• Local phone line required.

Virtual Currency Permissions (2025 Update):

As of 2025, Labuan-based Money Brokers may:

• Offer virtual currency spot trading (e.g., BTC, ETH).

• Offer crypto derivatives (e.g., BTC/USD futures).

• Operate with offshore clients only, in non-MYR (Malaysian Ringgit) currencies.

• 
  

Application & Compliance Process:

1. Documentation & Due Diligence:

• Attested copies of passports and address proof.

• CVs and proof of experience for directors.

• Financial statements or proof of funds.

• Professional and bank reference letters.

• Business plan, compliance policies, and organizational chart.

2. Regulatory Review & Interview:

• Attend an interview with the Labuan Financial Services Authority (LFSA).

• Prepare for questions about governance, internal controls, and digital asset operations.

• Local support provided throughout interview and bank onboarding stages.

3. Banking Setup:

• Account opening with banks like Maybank (3–7 weeks).

• In-person verification required at a Malaysian bank branch.

Taxation & Costs:

• Corporate Tax: 3% on net audited profits.

• No taxes on capital gains, withholding tax, or offshore instruments.

• Minimum annual local expenditure: ~USD 35,000.

• Annual license renewal fee: ~USD 1,500.

Operational & Ongoing Compliance:

• Submit audited financial statements annually via a licensed Labuan auditor.

• Maintain compliance with AML/CFT obligations and reporting standards.

• Use licensed liquidity providers (including EU, Mauritius, Seychelles, Vanuatu).

Confidentiality:

• Shareholders’ and directors’ identities are not published on public records, ensuring operational privacy.

Why Choose Labuan for Digital Asset Operations?

• Access to Malaysian and offshore banks (multi-currency capabilities including USD, AED).

• Islamic finance options available.

• Flexible STP model for serving non-resident clients worldwide.

• Streamlined regulatory path for launching a crypto-centric trading or brokerage firm.