Getting a VASP License: 8 Non-Obvious Mistakes to Avoid

Crypto has seen another dramatic increase in recent years, and more players are getting into the scene. Governments globally are not just first row viewers, but actors with their own interests: from taxation to safeguarding investors. To contain and organise the chaos, states worldwide are establishing Virtual Asset Service Providers (VASP) licensing frameworks. Obtaining a VASP license is a pivotal step for any cryptocurrency business, whether running an exchange, providing custody services, or offering advisory roles. The licensing process is complex, and even minor oversights can lead to delays, rejections, and other challenges. 

We’ve compiled a checklist of mistakes to avoid, helping ensure a smoother path to both obtaining and maintaining a VASP license.

What’s a VASP License and Why Does It Matter?

A VASP license is a regulatory approval required to legally offer digital asset services. It matters because it demonstrates compliance with global standards set by bodies like the Financial Action Task Force (FATF) and local authorities such as Dubai’s VARA or Switzerland’s FINMA. Obtaining a VASP license ensures that your business operates securely, combats money laundering, and protects its investors. 

Mistakes

1. Failing to Stay Updated with AML Requirements

• Mistake: AML regulations are constantly evolving to address emerging threats like money laundering through privacy coins or protocols. Failing to timely update your policies can result in rejection of a licensing application.
• How to avoid it: Establish a system to monitor regulatory updates from bodies like the FATF or local regulators. Ensure that the current AML/CFT policy is aligned with the regulatory framework.

2. Not Implementing Robust Cybersecurity Measures

• Mistake: VASPs are prime targets for cyberattacks (even major players like Bybit can get hacked, as evident from the record $1.5 bn heist in February 2025), and regulators increasingly scrutinize cybersecurity in VASP applications. 
• How to avoid it: Invest in advanced cybersecurity solutions, such as encryption, multi-factor authentication, and intrusion detection systems. Regulators often require applicants and license holders to undergo security audits to identify vulnerabilities. 

3. Incomplete or Inaccurate Documentation

• Mistake: A VASP license application requires a lot of documentation, all of which must be accurate and complete. Errors or omissions can cause significant delays or outright rejection. Please note that certain documents (like police certificates of UBOs and directors, or proof of residence) must be issued at the correct moment in order not to become too old for submission. 
• How to avoid it: Ensure accuracy in all details, like director CVs and proof of no criminal records. Pay attention to jurisdiction-specific requirements, such as language or cross-border documentation (Legal Nodes).

4. Underestimating Financial Requirements

• Mistake: VASP licensing involves significant costs (US$100,000+), including legal fees, expenses for compliance systems and security measures, and capital reserves, which are required by the majority of national regulators. Underestimating these expenses can lead to financial strain and a subsequent application failure.
• How to avoid it: Conduct a thorough financial analysis to budget for initial setup, ongoing operations, and potential fines. Be sure that you meet the minimum capital requirements, which can vary by jurisdiction.

5. Lack of Proper Staff Training

• Mistake: Key employees must be trained in AML, CTF, and compliance procedures to identify and report suspicious activities. In addition, certain positions (CFO, CCO) may require specific certifications or even higher education qualifications. As some projects are limited in their hiring options, this may be accidentally overlooked.
• How to avoid it: Provide comprehensive training programs covering customer due diligence (CDD), transaction monitoring, and sanction screening. Ensure that the key personnel have the required specialization and documents on dispatch. 

6. Not Conducting Thorough Risk Assessments

• Mistake: Regular risk assessments are critical to identify vulnerabilities across customers, products, geographies, and technologies. Without them, you may be unprepared for emerging threats.
• How to avoid it: Perform enterprise-wide risk assessments at least annually, and update your risk management strategies as needed.

7. Privacy and Compliance Imbalance

• Why it’s a mistake: AML/CFT regulations require VASPs to conduct customer due diligence and, at the same time, comply with the data protection framework. Striking this balance is absolutely crucial to ensure legal integrity and maintain investor trust.
• How to avoid it: Use privacy-preserving technologies and solutions while ensuring compliance with AML/CFT requirements. 

8. Poor Record-Keeping

• Why it’s a mistake: Accurate and complete records are essential for audits, compliance demonstration, and internal monitoring, one of the key VASP requirements. Poor record-keeping can lead to penalties from regulators.
• How to avoid it: Implement a secure, well-organized system for storing records, including KYC/CDD documents, transaction records, and compliance reports. Make sure that the records are stored at the registered office of a VASP, as it is a common requirement in major jurisdictions.

Extra from PPA: Ignoring Regulatory Relationships

• Mistake: Many VASP applicants view regulators solely as gatekeepers rather than ongoing partners. Overlooking the importance of building cooperative, communicative relationships with your future regulator will lead to unexpected misunderstandings and miscommunications later on.
• Why it matters: Regulatory frameworks aren't static, they constantly evolve in dialogue with industry players. VASPs that engage proactively and transparently with regulators tend to benefit from clearer guidance, and faster application processing. Also, after the licensing procedure, you can become a part of the structure that creates regulations. Regulators, including Singaporean MAS and Taiwan’s FSC, constantly request opinions of industry players when drafting new regulatory frameworks.
• How to avoid it: Contribute to a proactive communication channel with your regulator. Engage in dialogue, clarify ambiguous areas, seek early feedback on compliance, and demonstrate willingness to participate in consultations. Maintaining such relationships helps build trust, reduces friction during audits, and positions your VASP to adapt seamlessly as regulations inevitably evolve.

Final Thoughts

Remember, obtaining a VASP license is not a one-off event — it's the start of a continual compliance undertaking. The smartest move you can make is to approach licensing not as mere regulatory compliance, but as building a robust operational foundation that is always ready for change and adaptation.