Europe possesses one of the most robust markets for digital assets. Multiple countries have established bespoke rules to facilitate, or at least regulate, digital asset offerings. These may be securities or utilities or both. Gibraltar, Malta, Switzerland were quick out of the gate with rules. France recently passed legislation enabling utility token offerings. The UK provided clarity on their approach to “crypto-assets” just last month.

But while outsiders may view the European Union as a single market, beholden to an aspiring capital markets union, that is not really the case. Financial regulations are different in different member countries. Not to mention Switzerland which is outside the EU. The European Commission, as well as the Parliament, has discussed further harmonization but it remains a work in progress.

Israel Bitton, Head of Fintech at the David Rabbi & Co Law Firm, based in Tel Aviv, has worked with some crypto companies seeking to operate in some of these European crypto havens.

Bitton recently forwarded a comment on the market clarifying the regulatory challenges.

“If we look at exchanges operating, for instance, on an Estonian license, it’s a common misconception that said license allows them to engage with the wider European market,” said Bitton. “There is a great deal of confusion around this on the part of practitioners advising banks, but the fact is that they may be in breach of regulations.”

Bitton noted that there is no specific European legislation that deals with cryptocurrency, but there is a financial service framework.

“In the vast majority of cases, crypto businesses will require a financial license to operate legally. For those that do not necessarily wish to acquire one, however, there are ways to legally circumvent the need for a license by careful restructuring,” he explained.

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Crowdfund Insider asked Bitton to confirm that a digital asset exchange must receive a license in each European country in which it intends to operate. Bitton said that there are some nation-specific rules in which cryptocurrency businesses must acquire to operate in these regions.

“In jurisdictions where these do not exist, the challenge is for businesses to determine whether they’re violating already established financial laws – if the operations do not fall into the scope of the legislation, they can proceed in an unregulated fashion,” stated Bitton. “As for e-money licenses, there is some deviation from the regulations that govern exchanges dealing in fiat and cryptocurrency, but recent changes to European law now also require strict AML compliance. In many cases, even crypto-only businesses require some form of license to begin operating in a new jurisdiction.”