Navigating the Crypto Landscape in Saudi Arabia

Saudi Arabia's burgeoning fintech ecosystem presents a unique opportunity for crypto entrepreneurs. However, navigating the regulatory landscape requires careful planning and adherence to specific guidelines. This article outlines the essential steps involved in establishing a cryptocurrency company in the Kingdom and acquiring the coveted Virtual Asset Service Provider (VASP) license.

Company Formation and Licensing

To embark on a crypto venture in Saudi Arabia, the first step involves registering a legal entity. The most suitable structure is typically a joint-stock company, which can be established with the assistance of local company formation experts. Once registered, the company must apply for a SAGIA license if it's a foreign investor.

Acquiring a VASP License

The VASP license is the cornerstone of operating crypto-related activities in Saudi Arabia. To obtain this license, companies must meet several stringent criteria:

• Management Continuity: The company's management team must remain unchanged for at least three years before the license application.
• Financial Stability: Audited financial statements for the preceding three years, prepared according to Saudi accounting standards, are required.
• Industry Expertise: Senior executives must possess extensive knowledge or experience in the relevant field.
• Capital Requirements: The company must have sufficient capital to sustain operations for at least twelve months post-license issuance. The minimum capital requirement is SAR 10 million (approximately USD 2.6 million).

Permissible Crypto Activities

While Saudi Arabia doesn't recognize cryptocurrencies for general transactions, the VASP license enables companies to engage in a range of crypto-related activities, including:

• Digital banking
• Electronic payment processing
• Peer-to-peer lending and investment
• Asset and wealth management
• Crypto and blockchain applications
• Buy Now Pay Later (BNPL) services

Foreign Investment and Regulatory Compliance

Foreign companies can operate in Saudi Arabia's crypto sector, provided their activities align with the Central Bank's regulations. They can apply for a VASP license before registering a local legal entity. However, the chosen corporate structure must be established upon license issuance. It's important to note that the licensing process can take up to a year.

The Growing Fintech Landscape

Saudi Arabia's fintech sector has witnessed remarkable growth in recent years, fueled by a supportive regulatory environment and increased innovation. The number of fintech startups has surged from 10 in 2018 to 207 in 2023, demonstrating a 20.7-fold increase. These companies have collectively raised over USD 1 billion.

Establishing a crypto company in Saudi Arabia presents both opportunities and challenges. By carefully navigating the regulatory landscape and meeting the stringent requirements for a VASP license, entrepreneurs can capitalize on the Kingdom's growing fintech ecosystem. With the support of local experts, companies can successfully navigate the complexities of this dynamic market and contribute to Saudi Arabia's digital transformation.