Lithuania, Hong Kong or Canada: which jurisdiction to choose for international financial business?

For international financial business, jurisdiction is not just the country of registration of a company. Access to payment infrastructure, the ability to work with clients in different countries, capital requirements, regulatory burden and further scaling of the business depend on it. That is why, before launching a fintech project, payment service, money transfer or e-wallet, it is important to determine not just “where is it cheaper to open a company”, but where a specific business model will receive the best conditions for work. Among the popular options for international financial business, Lithuania, Hong Kong and Canada are often considered. But these jurisdictions provide fundamentally different opportunities.

Lithuania: if the main market is the European Union. Lithuania remains one of the practical options for fintech companies that want to build a business in the European legal framework.

The key advantage is the ability to obtain an Electronic Money Institution (EMI) or Payment Institution (PI) license and, after completing the relevant procedures, provide services in other EU countries. The Bank of Lithuania directly notes that unrestricted EMI and PI can operate throughout the EU. For example, a standard EMI license in Lithuania requires a minimum initial capital of €350,000. It allows not only to issue electronic money, but also to provide payment services stipulated by law. For a Payment Institution, the initial capital requirements depend on the specific set of services and can be €20,000, €50,000 or €125,000. Therefore, Lithuania is particularly interesting for fintech projects that plan to work with European clients, create payment accounts, make transfers, work with e-money or develop their own payment infrastructure.

It is important to understand that a European license is not a “permission to work anywhere without restrictions”. Notification procedures and relevant regulatory requirements apply to cross-border activities.

Hong Kong: if your business is focused on Asia & Hong Kong has a different logic. Its main advantage is the position of an international financial center and proximity to Asian markets, in particular China. For payment businesses in Hong Kong, the Stored Value Facilities (SVF) regime plays an important role. It covers, in particular, electronic wallets and other solutions that store monetary value and can be used for payments. Multi-functional SVFs are subject to licensing by the HKMA, unless they fall under the exemptions.

Hong Kong also has a developed payment infrastructure. For example, the Faster Payment System (FPS) allows for payments and transfers between banks and SVFs 24/7, supporting HKD and RMB. This makes the jurisdiction interesting for businesses that are building a financial product for an Asian audience, working with cross-border payments, or want to be closer to the Asian financial ecosystem. Hong Kong should not be considered an “Asian analogue of the Lithuanian EMI”. The regulatory model is different, so first you need to identify a specific financial product and only then select the appropriate permit or license.

Canada: if the main focus is North America. Canada may be of interest to financial companies focused on the Canadian market, international transfers, currency transactions and other money services. In Canada, money services businesses (MSB) and foreign MSBs that provide relevant services to clients in Canada must register with FINTRAC before starting their activities. Regulated categories include, in particular, currency exchange, money transfer and virtual currency transactions. There is a fundamentally important nuance here: registration with FINTRAC is not a banking or payment license. FINTRAC itself explicitly states that registration does not mean that the authority approves or licenses the company's activities. Separately, Canada regulates retail payment activities: payment service providers that operate within the relevant regime are subject to registration with the Bank of Canada.

Therefore, it is important to select a Canadian structure specifically for the business model: money transfer, payment processing, virtual currency, merchant services or another type of financial activity may have different regulatory requirements. It is a mistake to choose a jurisdiction only based on the principle of “where is it easier to get a license”. For financial business, it is much more important what exactly the authorization allows.

Before choosing a jurisdiction, you need to answer at least the following questions:

• Where are the main clients located?
• In what currencies will transactions be carried out?
• Do you need to open payment accounts?
• Will the company store client funds?
• Do you need your own e-wallet or issue electronic money?
• Are international transfers planned?
• Do you need card acquiring or payment processing?
• Do you plan to work with crypto assets?
• Do you need access to European passporting?
• Which banks and payment partners do you plan to work with?

It is the answers to these questions that often change the result. It may be beneficial for a company to register in Canada, but obtain a payment license in Europe. Or have a structure in Hong Kong for the Asian direction and a separate regulated company in the EU.

If a company needs to quickly enter the market, it does not always make sense to go through the entire process of creating a structure and licensing from scratch. An alternative may be to purchase a ready-made company with an already established corporate structure, license, banking or payment relationships and operational infrastructure.

Legal due diligence is especially important here. It is necessary to check the license status, regulatory history of the company, owners and directors, agreements with banks and PSPs, AML/KYC procedures, financial indicators, debts, litigation and possible restrictions on changing ownership. For a regulated financial business, the mere presence of a license does not mean that the company is automatically suitable for a new owner. In some cases, a change of control or ownership structure requires the approval or notification of the regulator. There is no universal “best” jurisdiction for international financial business. The best will be the one whose license, regulatory regime and financial infrastructure correspond to the specific business model and geography of clients.

Antwort Law helps you choose a jurisdiction for your international financial business, assess licensing requirements and structure your entry into the market. We also help you select ready-made licensed companies and conduct legal due diligence before your acquisition. Are you planning to launch a fintech, payment service, MSB, EMI, PSP or other financial business? Contact Antwort Law - we will help you determine the optimal jurisdiction, select the appropriate license or ready-made licensed company and support the transaction from legal due diligence to the transfer of the business to the new owner.

Lidia Ivanova

International lawyer
Antwort Law