Following the crypto boom and NFT success, some individuals think about how to start crypto business in the UK or other trusted jurisdiction. However, in this post we’ll focus only on the United Kingdom. Today we’ll speak about the UK’s blockchain business landscape and then consider a step by step instruction how to start crypto business in the UK.
How many crypto companies are in the UK?
Before doing anything important in terms of establishing own crypto company, it is extremely important to be aware of the UK’s blockchain business landscape.
According to Statista, a company specializing in market and consumer data, as of April 2019 there were 186 blockchain companies in the UK. In comparison with the US, this number is not big. The US has almost four times bigger number — 726 companies.
At the same time, Crunchbase, a platform for finding business information about private and public companies, 362 crypto companies are registered in the UK. Over 93% of them are commercial organisations and in average, they are founded in 2016.
The third resource – a data platform Beathurst, declares something between these numbers — 221 companies, that are developing blockchain-driven software and blockchain services. However, the majority of these companies — 67%, are currently in the seed stage of growth. In other words, this is a reflection of how new the sector is.
However, in accordance with Companies House, the United Kingdom’s registrar of companies, as of December 2021 there are 276 companies, which has a word “crypto” in their title and are registered in London. Full list of this companies you can download here.
Finally, the Companies House has a list of 580 active companies which mention crypto in the title of the company. However, considering that among 28 cryptoasset firms, registered by FCA (Dec 2021) only one (!!!) has a word “crypto” in its title, this means the number of the crypto companies in the UK may be ten times bigger than we are aware of now.
How to start crypto business in the UK: step by step instruction
If you are ready to establish your own crypto business, you must remember: however, this is not an easiest way to go but if so many successful people have done it, why not to try? There are 6 main steps which you need to do before you will be legally authorised to conduct crypto business in the United Kingdom.
In brief, first of all, you need to conduct research of crypto landscape. Then you have to write a business plan for your crypto company. After this – choose business name and the company’s location. When this task will be completed – consider business structure depending on the commercial purposes of your company. After that, register your business at Companies House, HMRC, get authorisation from the FCA and open the bank account. And, this will be the finish line for the registration process but the starting point for your crypto business. Let’s consider these stages in more details.
Step 1. Conduct Research of Crypto Landscape
The first paragraph of our post is a little bit about this :). However, in fact, you need to dig even deeper. Before starting any business, it’s important to know the main stakeholders of the market, its size, number of competitors, number of investors, successful investment rounds in crypto companies and price tag of crypto companies on exits.
It is always good to conduct primary and secondary research:
- primary research includes Zoom interviews, online surveys and questionnaires, or focus groups to gather potential clients or customers and getting their feedback directly. You can find the candidates for your primary research in Twitter, Discord or Linkedin;
- secondary research, when you need to to analyze data that has already been published about the crypto market.
Key questions for the research of crypto industry
- Which factors are important when customers purchase product or service from the competitor?
- What do people like or dislike about current products or services available on the market?
- How the existing product can be improved? What areas for improvement are discussed by crypto community?
- What is the price policy for a product or service offered by the competitors?
Don’t focus only on secondary research and also don’t survey only the people you know. Otherwise, your research may have a bias.
Finally, we are here to help you but do your best to get more insights from news, niche websites and even LinkedIn rumours about crypto.
Step 2. Write business plan for your crypto company
Nothing special but you need to write traditional things. For example, the most required parts are executive summary, details about your products and services, marketing strategy and analysis, financial planning, and a budget.
Executive summary for crypto company
An executive summary is the overview of entire business plan and it’s one of the most important its parts. It should briefly highlight the most important aspects of the plan. There are some important things you need to remember before you’ve start to write executive summary for business plan of your crypto company.
Top 5 tips for drafting executive summary of business plan for crypto company
- It’s better to write this part of your business plan at the final stage. In other words, after you have completed the entire document – write the executive summary, it will be easier for your to highlight the main paragraphs.
- The first paragraph of the executive summary for your crypto company must have a clear statement of why you have a great business idea in crypto. You may work perfectly on the other parts of the business plan but if you fail with this one – no one will be interested in a bad idea. Even if it’s about so promising crypto industry.
- You can draft your executive summary as an elevator pitch and then to add extra facts to the strongest point about your business idea.
- Don’t oversell however try to use either neutral or positive tone of your writing. Write about expected unusual challenges but don’t list more than three of them. By the way, don’t write about volatility of cryptocurrencies – it’s already well known fact. And don’t forget about the mitigation of the risks and positive aspects of your crypto business.
- After you finish the draft of the document, read it aloud. Then proofread it again next day and you may get completely different feeling about your text.
Details about your crypto products and services
In this section of your business plan you need to write about the products and services your crypto business will provide. Moreover, the most important part of this description must include details how it will differ from the competition.
Top 2 tips for drafting brief about products and services of crypto business
- Don’t write highly detailed or purely technical descriptions. However, as a bonus, include brief information about any patents, copyrights, and trademarks you own or have applied.
- Try to write at least one sentence as an answer for the following questions about your crypto business:
- Have you already developed your products or services? If so, are they available for the customers?
- Are you developing your crypto products or crypto services by yourself? Explain the sustainability of production process.
- Highlight the timeline for bringing crypto products and services to market.
- What price do you plan to charge? Which profit margin do you expect?
- Why are your products or crypto services different? What is your “secret sauce” in comparison with offerings from other players in your niche of crypto market?
- List up to three competitive disadvantages you will face, when you start your crypto business. How do you plan to overcome them?
Marketing strategy and analysis
In the marketing strategy and analysis you must clarify what do you want to see at the finish line. In other words, rather than assume the aim from the description given to it, you need to write about specific goals your crypto company must achieve.
Your marketing strategy has to cover everything from company culture and positioning, through market research. It may consist details about new business/product development, advertising and promotion, PR (public/press relations), and all of the sales functions as well. In other words, it must answer the questions about what crypto business will sell, to whom, when and how.
Top 2 tips for drafting marketing strategy and analysis for crypto company
- It’s better to check the Flesch Reading Score of your writing. Anything over 60 will be fine. This means that anyone without specific knowledge of your future crypto business should be able to understand your executive summary and recognize the value proposition in it.
- Avoid words such as “maybe”, “probabaly” and “possibly”. Unless you use these words in your motto or when explaining the marketing strategy. For example, the slogan “Probably, the best crypto wallet in the metaverse” helps clearly understand your future competitors and challenges ahead.
Financial planning and budget for crypto company
Importantly, for a greenfield company the executive summary shouldn’t include a great deal of financial information. However, it should explain the future crypto business.
Do not be ambiguous about the numbers and descriptions. Try to avoid multiple options since they convey indecision and uncertainty. As a result, you may get turn-offs for potential investors.
In fact, you need to present a clear plan for your business and write about:
- Costs and pricing strategy
- Sales and costs forecast
- Survival budget
- Cashflow forecast
- Costs table
This financial table will include the most important aspects about money in your future crypto business.
Costs and pricing strategy
This part includes names of each of product or service of your crypto business and component costs.
For example, if you have a mobile application on blockchain, available on Google Play and Apple Store, you must include the fee for listing there. Also, you need to include here the cost of blockchain mobile development. And it does not matter – either it is a result of work of your employee or the outcome of outsourcing externally.
Sales and costs forecast
This chapter includes predictions of your sales and costs for products or services on monthly basis. You can also include information about seasonal trends, which may impact your sales. At the same time, due to changing nature of crypto industry and volatility of cryptocurrencies, these trends must not be purely based on the niche environment.
This is extremely important part of financial tables for your crypto business. It shows the financial minimum you need to spend on survival for your company.
First and foremost it includes payment for office rent (or monthly/annual fee for virtual address) and bills (council tax, electricity and broadband). These two components are vital on physical level for existence of your company.
Then you need to include the costs for your digital infrastructure. For example, if you use Google Workspace to maintain your business or accountant services to help with the financial part of it – they all charge fees. Annual payments for domains may go here as well.
Also, don’t forget to include transport costs either you own your own car (insurance, fuel, MOT) or hire one. Even if you use public transport for business meetings you need to put the price of this travel as well.
Finally, consider to provide insurance for your employees even for yourself if you are the sole trader. However, you can put it in the business survival budget alongside other perks for stuff.
In brief, it means money in / money out. Sure, this part is based on pure imagination and lots of risks, which may jeopardise available cashflow. At the same time, this table helps to balance the financial predictions.
Finally, here you need to write about repayments of Loans and other sources as well as your survival budget to summarise the financial offer of your company.
You can download a template of Business Plan Financial Tables for Crypto Company (in XLSX) here.
Templates of business plan for crypto company
Finally, in our opinion, one of the most relevant examples of business plan for any company (including crypto business) were created by the Prince’s Trust, a UK-based charity founded in 1976 by Charles, Prince of Wales. It helps young entrepreneurs to start own business. However, also it demonstrates the most important aspects of setting up any business in the UK.
You can download business plan in PDF to double-check your knowledge and already prepared documents.
Step 3. Choose business location and business name
On any stage of your company’s work you will be able to change both location and name of your business. However, it is better to do the right things from the beginning rather then change them afterwards.
How to start crypto business and choose business location?
To save money you can use your own address as the business location for your crypto company. Otherwise, to protect your privacy, consider a wide range of B2B service providers specialising in virtual business address and other support for businesses.
As we’ve mentioned, most of the UK-based crypto companies are headquartered in London. However, in top-10 largest cities in the United Kingdom there are also:
How to start crypto business with the right business name?
When choosing the business name for your crypto company, you must follow the governmental advice about this. The main rule is the following: business name of your crypto business should not be the same as already registered one.
Your name cannot be the same as another registered company’s nameUK Government
Moreover, there are basic rules when you consider the title of your future crypto company:
- don’t register name, which is ‘same as’ existing one. For example, if you’ll try to register “CryptoNafta LTD” or “Crypto-Nafta LTD” you will definitely fail because there is a registered company “Crypto Nafta LTD”
- in a case of “too like” name, you may need to change your name. For example, there is a registered company “Crypto for music LTD”. If you will register “Crypto 4 music LTD” you’ll get troubles and need to change your business name.
- finally, the business name of your company should not be offensive. For example, even don’t try to register “Her Majesty Crypto Company” or “Crypto Royal”. Don’t google, these business names do not exist.
Step 4. Consider business structure
Fine! You have a business plan, name of your future crypto business and its location. Now it’s the right time to thing about the business legal structure.
How to start crypto business: commercial
The most commonly chosen business legal structures are sole trader, partnership, limited liability partnership (LLP) and limited liability company (LTD). Also, you may choose among community interest company and co-operatives, offshore companies and franchises.
This is not an exhaustive list but covers some of the key issues that some may feel are advantages or disadvantageous for specific legal structure.
How to start crypto business as a sole trader?
If you work alone and would like to get a status of self-employed person, then a sole trader is the right choice. However, this also means you must register with HM Revenue & Customs (HMRC) for self-assessment as soon as you start trading.
Advantages of Sole Trader status in crypto
- You have full control over your work and fully own your profits
- Establishing your crypto currency business as a sole trader is easier than any other forms
- You don’t need to hire staff for your work
- More privacy and personal relationship with key stakeholders
- You can change the business structure upon your request
Disadvantages of work as a sole trader in the UK crypto business
- You have full debt liability and have individual responsibility for all decisions
- Investors less prefer to invest in crypto business with sole trader status
- Taxation is not complicated but also lack variety of alternative tax schemes.
Finally, it is important to notice that a sole trader can employ staff. Hence, it may be acceptable legal structure for your crypto business.
How to start crypto business as a Partnership?
In crypto partnership, both you and your partners are personally responsible for your business. It is possible to nominate a limited company (which counts as a ‘legal person’) as a partner.
Partners are allowed to share the business profits. However, in terms of taxation, each partner pays tax on their share.
Advantages of Partnership in crypto
- You have less bureaucratic legal structure with less obligations
- Better access to knowledge, skills, experience and contacts due to more partners and capital
- Privacy about the affairs of a partnership business. Also, the partnership’s financials cannot be independently checked at Companies House.
Disadvantages of Partnership in the UK crypto business
- Partnership will be dissolved upon the resignation or death of one of the partners
- Each partner is paying for the actions of the other partners.
- Disagreements may not only harm the business and reputation but also damage the relationship between the individual partners.
How to start crypto business as a Limited Liability Partnership (LLP)?
There is a huge conceptual difference between partnership and limited liability partnership in the liability of the partners. As a separate legal entity LLP does not have shared responsibility. Its members, who are in fact the partners, are only liable for the amount of money they invest and personal guarantees.
Advantages of Limited Liability Partnership in crypto
- Protection for the member’s personal assets from the liabilities of the business.
- Flexibility in operations, distribution of profits among the members and membership levels.
- You may have corporate ownership. In comparison with limited liability companies, LLP can appoint two companies as members of the LLP. If you have LTD, then at least one director must be a real person.
Disadvantages of LLPs in the UK crypto business
- Limited liability partnership has lack of privacy and partners must disclose financial accounts to the Companies House for public record.
- Retention of profit is not the same as in a company limited by shares. This means all earned profit must be distributed without any hold over profit to a future tax year.
- Any LLP must have at least two members which brings risks of dissolve business if one member chooses to leave the partnership.
- LLP must start to trade within a year of registration. Otherwise, it will be struck off.
How to start crypto business as a Limited Liability Company (LTD)?
This is one of the most popular legal structures for crypto business. A private company is incorporated and limited by shares. This means that the company has shareholders. Importantly, the liability of the shareholders to creditors of the company is limited to any money they invested. In other words, any shareholder’s personal assets are secure and protected if the company will become insolvent.
Advantages of Limited Liability Company in crypto business
- Owners are not personally responsible for business debts and only to the extent of the amount of capital they invested.
- No restrictions on the number of members and flexibility in management structure organisation
Disadvantages of LTD in the UK crypto business
- Lack of privacy since LTD’s annual accounts and financial reports must be placed in public domain
How to start crypto business: non-profit
If you prefer to run non-profit crypto business, it will be a social enterprise. This type of organisations does not have a direct purpose to get profit for private shareholders and directors.
However, non-profit crypto organisations are minor players in crypto market, they still exist. More details about the registration of crypto non-profit can be found here.
Step 5. Register your business at Companies House and HMRC
This is an official registration of your business.
How to start crypto business with Companies House
All you need is to fill the form and put the names of company stakeholders, date of establishment, nature of business (SIC code) and persons with significant control. You’ll be charged a fee for registration and then you will pay annual fee for updating the records.
How to start crypto business with HMRC
This step traditionally goes smooth and does not bring too much concerns. All you need to have is your email and mobile phone. Additionally, you have to provide information about Companies House registration number, your company’s address and other fundamental information about your new crypto business to get it registered for Corporation Tax, PAYE and other relevant payments.
Step 6. Get authorisation from Financial Conduct Authority
This is one of the most difficult steps for most of the companies, which plan to conduct crypto business. New cryptoasset businesses that intend to carry on a cryptoasset activity after 10 January 2020 must be registered before any activity can be carried out. In other words, you cannot start doing your crypto business unless you get the FCA authorisation for this. In fact, this includes (among other things) exchanging and holding custody of cryptoassets on a customer’s behalf.
If a company provides services involving cryptoassets without FCA permission, they are at risk of being subject to the FCA’s criminal and civil enforcement powers.Financial Conduct Authority
List of important resources you must check before the registration:
FCA Payment Services and Electronic Money
Pages 17 and 18 of this document explains the activities FCA regulates and whether your future business falls within any of these. You need to understand which areas of your future activities fall within the Cryptoassets area. The details are here.
Cryptoasset Registration Flowchart
This flowchart helps to understand the next steps you need to do if your future business requires FCA authorisation.
For example, in an easy form it helps to understand do you need to register with the FCA for carrying on cryptoasset activity or not. Also, it explains the cases, when FCA registration is likely to be required or may not be required at all.
Cryptoassets: AML/CTF regime: Register with the FCA
This document answers the following questions:
- Who needs to register?
- How do you register your cryptoasset business?
- What information does FCA need?
- What do they need to make a fit and proper assessment
Also, this part of FCA website explains the details about cryptoasset activity under the Money Laundering, Terrorist Financing and Transfer of Funds (Information on the Payer) Regulations 2017 (MLRs)
FCA Money laundering registration
In accordance with the mentioned MLRs, FCA is responsible for supervising the anti-money laundering controls of businesses that offer certain services. Cryptoasset businesses are one of them. As a result, when starting your crypto company, you must determine whether registration is needed for this or not.
UK Crypto Payment Services Registration
Additionally to the documents, listed above, if you will provide Payment Services only, then get more details in Chapter 15 (page 2011) about the fees you might have to pay for this. Otherwise, visit FEES 3 ANNEX 8.
Finally, depending on the type of activity as detailed on Page 18 of the PSD Approach Document, it may be useful to have a look at further information on FCA Handbook – PERG 15.3 about Payment Services. So you can decide whether authorisation is needed for what you want to do.
Authorisation process for crypto payment services
Authorisation process for crypto payment services is basically explained in Chapter 3 (Page 25). You will find all the steps you will have to follow using Connect system to register as user and start an application for new authorisation if so decided.
There are different types of authorisation you can apply for. Hence, here you can find the explanations of the differences among each other and which is the one most beneficial for your crypto business if so decided to apply for authorisation. In general, application for an authorisation takes from 3 to 12 months depending on how complete the application is submitted. If you are applying for Cryptoassets you may expect up to 3 months but if it’s for Payment Services as well, then it will take longer.
Step 7. Apply for a bank account and start your crypto business
There are over a dozen crypto friendly banks for startups which work with cryptoassets industry of the United Kingdom. Some of them offer free business accounts for startups, particularly, in crypto.
Top-5 UK banks (and challenger banks) for crypto startups in 2022
- Revolut supports operations to buy/sell cryptocurrencies such as Bitcoin and Ethereum.
- Xace accepts alternative online payments and actively promotes esports banking and online gaming
- Standard Chartered Bank demonstrates rather positive attitude towards crypto
- Cashaa positions themselves as “the biggest community of crypto businesses who have left their ordinary banking to join our next generation crypto friendly banking services”
- Monzo declares its neutral status in personal banking for operations with cryptocurrencies and crypto exchanges.
Problems of registering a bank account for cryptoasset business
It seems to be one of the easiest steps, however, it does not go smooth every time.
The problems start when registering a bank account for the UK-based crypto business in non-crypto friendly bank. According to the insights of the industry, there is a list of banks (and challenger banks), which do not possess straightforward acceptance of crypto businesses.
In brief, these banks don’t like transactions related to crypto. And it’s not just about ban of Binance after FCA’s warning in June 2021. This is the only exchange we’ve stopped all payments to. You can’t use your credit and debit cards, issued by any of these banks, to buy and sell crypto as you wish. Also they do not allow transfers to cryptocurrency exchanges and similar crypto operators. Finally, you will not have a chance to cash-out funds from your cryptocurrency accounts.
Due to an increase in scams relating to some cryptocurrency exchanges we have taken steps to either block payments or restrict the amount you can send each day to these firms, until further notice.NatWest
Top-12 UK banks (and challenger banks) to avoid for crypto startups in 2022
- Lloyds Bank has distanced itself from crypto and does not allow any operations with crypto exchanges but offers a new insurance policy to protect cryptocurrency held in online wallets against theft or other malicious hacks.
- Barclays follows the cryptocurrency trend but keeps personal and business banking with cryptocurrencies under review.
- HSBC is waiting for the regulation of cryptocurrency industry
- Santander provides good learning resource about cryptocurrencies but, in general, does not support them
- Nationwide officially prohibits only payments to Binance. However, its cryptocurrency policy is under review
- Metro Bank does not have any cryptocurrency offers on the official website
- Halifax does not support cryptocurrency operations. However, they need to adjust news filters on their official website since they published news about Bitcoin trading.
- Royal Bank of Scotland has rather sceptical view on crypto currencies
- Virgin Money banned credit card purchases of cryptocurrencies back in 2018 but continues to educate their customers about the cryptocurrency pros and cons
- TSB Bank bans operations with crypto and considers them as fraud.
- Natwest explains why do they ban cryptocurrency operations. They also don’t allow to open business bank account for crypto company.
- Starling Bank remains vigilant about fraud in the crypto market
If you open a business account for your crypto company, then you will be able to start trading and conducting business legally in the UK.
I hope this blog post is helpful for you and now you will know how to start crypto business in the UK and share it with your friends and other stakeholders🤞🇬🇧📈