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Labuan has established itself as a recognized hub for companies seeking a crypto license for exchange, trading, and other cryptocurrency operations. With friendly tax rules and a clear regulatory process, Labuan offers a practical way to obtain or set up a crypto license for serving global clients. Here you will find key information about requirements, licensing steps, ongoing compliance, and what you need to run a successful crypto business in Labuan. Whether you are looking to get a license, understand what is needed, or learn more about crypto laws in Labuan, our team is ready to support you at each stage.

Main advantages of the Labuan licensing regime

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    Clear regulations

    Labuan has a well-defined legal and regulatory framework underpinned by the Labuan Financial Services and Securities Act. The rules are designed to be clear and consistent, reducing uncertainty for companies and their clients.

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    Favorable taxation

    Labuan offers a low corporate tax rate of 3% on audited net profits or a flat payment of approximately MYR 20,000 per year. There is no tax on capital gains, dividends, royalties, or stamp duty. Over 70 double taxation agreements further help to minimize cross-border tax risks.

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    Efficient business setup

    Crypto businesses can be 100% foreign-owned. There is no requirement for a local Malaysian partner. Incorporation and licensing are handled through licensed trust companies, streamlining the process.

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    Qualified local workforce

    Labuan boasts a local pool of English-speaking, finance- and tech-savvy professionals. This makes it easier to recruit skilled staff or outsource compliance and operations tasks.

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    Operational flexibility

    Licensed companies can run a broad spectrum of digital finance business, such as cryptocurrency exchanges, wallets, token issuance, and payment services. Several related activities can be combined within a single legal entity.

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    Strategic location

    Sitting at the heart of Southeast Asia, Labuan offers easy access to Asian and global markets, facilitating partnerships and customer acquisition.

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    Strong reputation and compliance

    Labuan’s standards are recognized by major financial institutions, making it easier to access banking and payment facilities. The jurisdiction’s approach to anti-money laundering and counter-terrorist financing (AML/CFT) ensures international recognition and reduces risks of reputational issues.

The licensing process: Step by step

Step 01

Pre-application consultation

Initial discussion with Labuan FSA to outline business plans and confirm application requirements.

Step 02

Formation of a Labuan company

Setup via a licensed trust company; preparation of supporting documentation and proof of capital.

Step 03

Document preparation

Submission of a business plan, internal policy documents, KYC/AML manuals, proof of funds, and details for all directors/shareholders.

Step 04

Application filing and fee payment

Application to Labuan FSA with payment of licensing fees.

Step 05

Regulatory review and interviews

Labuan FSA assesses the fit-and-proper status of the management team and conducts compliance interviews if needed.

Step 06

License issuance

On approval and subject to fulfillment of all conditions, the license is granted and business operations can commence.

  • Step 01

    Pre-application consultation

    Initial discussion with Labuan FSA to outline business plans and confirm application requirements.

  • Step 02

    Formation of a Labuan company

    Setup via a licensed trust company; preparation of supporting documentation and proof of capital.

  • Step 03

    Document preparation

    Submission of a business plan, internal policy documents, KYC/AML manuals, proof of funds, and details for all directors/shareholders.

  • Step 04

    Application filing and fee payment

    Application to Labuan FSA with payment of licensing fees.

  • Step 05

    Regulatory review and interviews

    Labuan FSA assesses the fit-and-proper status of the management team and conducts compliance interviews if needed.

  • Step 06

    License issuance

    On approval and subject to fulfillment of all conditions, the license is granted and business operations can commence.

Operating a Labuan crypto business means adhering to strict reporting and compliance requirements:

  • Annual audit and reporting
    Licensed companies must appoint an approved external auditor and file audited financial statements within six months of year-end.
  • Client funds segregation
    Client monies must be held separately and reported to the regulator.
  • AML/CFT and KYC compliance
    Ongoing monitoring, staff training, and transaction screening are mandatory.
  • Technology and security
    Robust digital security infrastructure is required, and any breaches or incidents must be reported to Labuan FSA within 14 days.
  • Substance requirements
    Minimum levels of local staff, annual operating expenditures, and physical presence must be maintained.

Labuan crypto license: Key questions and answers

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What is a Labuan crypto license and who issues it?

A Labuan crypto license is an official approval that allows a company to operate cryptocurrency-related businesses, such as exchanges or payment platforms, in Labuan, Malaysia’s financial center. The license is issued by the Labuan Financial Services Authority (LFSA).

What types of activities require a crypto license in Labuan?

You need a Labuan crypto license for activities like cryptocurrency exchange (crypto-to-crypto and fiat-to-crypto trading), digital asset issuance or token offerings, payment processing using crypto, investment in digital assets, and digital asset custody. Some services, such as custody, may need an extra license.

What are the main requirements to obtain a Labuan crypto license?

To get a Labuan crypto license, you must set up a Labuan company through a trust company, establish a physical office on the island, employ at least two full-time staff in Labuan, and meet minimum capital requirements. You must also show that you have proper Anti-Money Laundering (AML) and Know Your Customer (KYC) procedures and appoint a qualified compliance officer.

What are the paid-up capital requirements for a Labuan crypto license?

The paid-up capital depends on your business type. For a crypto exchange or money broking, it’s RM 500,000 (about USD 110,000–130,000). For a payment system or credit token operation, you need RM 300,000 plus proof of USD 100,000 in funds. Investment banks or digital banks require higher capital, starting at RM 10,000,000.

How long does it take to obtain a Labuan crypto license?

The whole process usually takes about 4 to 6 months. This includes company registration, preparing documents, submitting the application, and passing review and interviews with LFSA.

Are there ongoing compliance obligations for licensed crypto businesses in Labuan?

Yes. You must appoint an external auditor, submit annual audited accounts, keep a detailed transaction record, and regularly reconcile client funds. You also need to report security breaches quickly and follow strict AML and KYC standards.

Can a Labuan crypto licensee serve clients outside Malaysia?

Yes, Labuan-licensed crypto companies can serve international clients in most countries. However, they are generally not allowed to offer services directly to Malaysian residents or businesses.

Can foreigners own 100% of a Labuan crypto company?

Yes, Labuan allows full foreign ownership of licensed companies. There are no restrictions on foreign shareholders or directors, as long as they pass the regulatory fit-and-proper test.

Yes, Labuan allows full foreign ownership of licensed companies. There are no restrictions on foreign shareholders or directors, as long as they pass the regulatory fit-and-proper test.

Labuan permits trading in “admissible” digital assets. This includes major cryptocurrencies, central bank digital currencies (CBDCs), and certain stablecoins. Privacy coins and algorithmic stablecoins are not allowed.

What are the main annual fees and costs associated with a Labuan crypto license?

You pay annual license fees, which vary by business type (from USD 1,500 for money broking to USD 30,000 for a digital bank). Corporate tax is 3% on profits or a fixed MYR 20,000 yearly. You also need to cover office, staff, compliance, and auditing expenses as required by substance regulations.

  • Activity Description
    Crypto-to-crypto trading Exchange of one cryptocurrency for another
    Fiat-to-crypto trading Exchange of fiat money (e.g., USD, MYR) for cryptocurrencies
    Crypto-to-fiat trading Conversion of cryptocurrencies back into fiat
    Listing digital assets Allow issuers to list cryptocurrencies and tokens on the platform
    Digital asset custody Providing secure storage and safekeeping of client cryptocurrencies
    Transaction settlement Settling trades and ensuring timely and correct transaction processing
    Payment and remittance Processing payments using cryptocurrencies and electronic money
    Blockchain token issuance Issuing blockchain-based tokens for use in commercial or investment applications
    Wallet services Providing clients with secure digital wallets
    Ancillary fintech services Related digital services such as robo-advisory, e-KYC, blockchain tech
  • Requirement Details
    Legal entity Must be a Labuan-incorporated company (via a licensed trust company); 100% foreign ownership allowed
    Minimum paid-up capital RM 500,000 (approx. USD 110,000) for exchanges and money broking
    Physical office Mandatory; must be in Labuan; must house at least 2 local full-time employees
    Key personnel Fit and proper directors, shareholders, AML compliance officer; evidence of experience
    Corporate documents Business plan, AML/KYC policies, operations manual, security & technology documentation
    Regulatory approvals Letter of consent (for regulated entities from elsewhere); compliance with AML/CFT/Travel Rule
    Banking Corporate account in Labuan with paid-up capital evidenced by bank certificate
    Auditing & accounting Must appoint external Labuan-approved auditor; submit annual audited accounts
    Compliance frameworks Written manuals for AML, CFT, and risk management; compliance with reporting obligations
    Security & transparency Client assets must be segregated; systems must support secure, auditable transactions
    Prohibited products No privacy coins or algorithmic stablecoins allowed
    Ongoing obligations Regular reporting to FSA, including incidents, suspicions, and transaction histories
  • License Type Minimum Capital Annual State Fee (USD) Staff Requirement Special Conditions
    Money Broking RM 500,000 (≈ USD 110,000) 1,500 Min. 2 full-time
    Payment System RM 500,000 13,000 Min. 2 full-time
    Credit Token RM 300,000 + USD 100,000 proof 13,000 Min. 2 full-time
    Investment Bank RM 10,000,000 30,000 Min. 2 full-time
    Digital Bank RM 10,000,000 30,000 Min. 2 full-time
  • Tax or Financial Item Labuan Crypto Company Notes
    Corporate tax rate 3% of audited net profits Option to pay flat MYR 20,000 annual tax
    Capital gains tax None
    Dividend tax None
    Withholding tax None
    Double taxation treaties Yes, over 70 Global applicability
    GST/VAT None
    Foreign staff tax relief Up to 50% reduction
    Non-resident director tax relief Up to 100% exemption
    Currency controls None Broad range of currencies accepted
    Import duty, inheritance, capital None
    Minimum annual spend (substance) RM 100,000+ For maintaining status and eligibility
  • Step Description Approximate Duration
    Initial consultation Business model review with Labuan FSA (optional but advised) 1–2 weeks
    Company incorporation Via licensed trust company 1–2 weeks
    Document preparation Business plan, compliance manuals, policies, due diligence 1–2 months
    Application submission Submission with required fees —
    LFSA review Due diligence, interviews, clarification requests 3–5 months
    License approval Conditional approval (if needed, fulfillment of any conditions)
    License issuance Regulatory certificate issued Upon final approval
    Total average timeline End-to-end process 4–6 months

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