Crypto OTC Desk Licensing 2026: Requirements for Over-t...

Running a crypto OTC desk without understanding when your activity crosses into regulated territory is one of the fastest ways to get shut down. The licensing requirements vary by jurisdiction, but the trend is clear: regulators are closing the gap between exchange oversight and OTC oversight.

Why OTC desks are different (and why regulators don't always care)

Over-the-counter crypto trading handles large block transactions outside of public order books. A client wants to buy $5 million in Bitcoin without moving the market price. An OTC desk provides a quote, sources the liquidity privately, and executes the trade bilaterally. No order book. No public price impact. Typical minimum trade sizes range from $50,000 to $500,000 depending on the desk.

This distinction matters operationally but not always legally. From a regulatory perspective, the question is whether you are facilitating the exchange of crypto assets for fiat currency or other crypto assets as a business. If yes, most jurisdictions consider that a regulated activity regardless of whether you use an order book or a phone call.

The confusion arises because early crypto regulation targeted exchanges explicitly. OTC desks argued they were not exchanges and therefore not covered. That argument worked in 2018. It does not work in 2026.

UK: FCA registration is mandatory

The UK's Financial Conduct Authority requires any business carrying on cryptoasset activity in or from the UK to be registered under the Money Laundering Regulations. This covers OTC desks explicitly. The FCA's definition of "cryptoasset exchange provider" includes firms that exchange crypto for money or money for crypto, or crypto for other crypto, by way of business.

The phrase "by way of business" is the trigger. If you execute OTC trades regularly and for profit, you need FCA registration. Doing it once for a friend does not require registration. Doing it weekly for paying clients does.

What registration involves:

Anti-money laundering program meeting FCA standards (risk assessment, customer due diligence, transaction monitoring, SAR filing procedures)
Fit and proper assessment of all beneficial owners, officers, and managers
Ongoing compliance costs including an MLRO (Money Laundering Reporting Officer), typically costing GBP 50,000 to GBP 80,000 annually if outsourced or GBP 70,000 to GBP 120,000 for a full-time hire
Registration fee: GBP 2,000 to GBP 10,000 depending on firm size

The FCA's rejection rate is notable. Since the crypto registration regime began, the FCA has rejected or seen withdrawal of over 80% of applications. Common failure points: inadequate transaction monitoring systems, UBOs with unresolved regulatory history, and AML risk assessments that read like templates rather than genuine analysis of the firm's specific risk profile.

Beyond MLR registration, OTC desks that offer derivatives, futures, or leveraged products need full FCA authorization under the Financial Services and Markets Act. That is a significantly more demanding process with capital requirements starting at GBP 75,000 and often exceeding GBP 750,000 depending on the activities.

Switzerland: FINMA's case-by-case approach

Switzerland treats crypto OTC activity through its existing financial intermediation framework. The Swiss Financial Market Supervisory Authority (FINMA) requires OTC desks to determine whether they qualify as financial intermediaries under the Anti-Money Laundering Act (AMLA).

If you exchange crypto for fiat or fiat for crypto as a business in Switzerland, you are a financial intermediary. You must either join a self-regulatory organization (SRO) recognized by FINMA, or obtain direct FINMA supervision. Most OTC desks choose the SRO route because it is faster and cheaper.

SRO membership requirements:

Application fee: CHF 5,000 to CHF 15,000 depending on the SRO
Annual membership fee: CHF 3,000 to CHF 10,000
AML compliance program including CDD, transaction monitoring, and reporting
Audit by an SRO-recognized auditor every 1 to 3 years (CHF 10,000 to CHF 30,000 per audit)

The VQF and PolyReg are the two SROs most commonly used by crypto businesses. Processing times run 2 to 6 months for SRO membership, versus 6 to 18 months for direct FINMA supervision.

Where Switzerland gets tricky: If your OTC desk also holds client assets (even temporarily during settlement), FINMA may classify you as a custodian, triggering additional licensing requirements. If you offer any form of leveraged trading or derivatives, you enter securities dealer territory, which requires a full FINMA license with minimum capital of CHF 1.5 million. The line between "executing an OTC trade" and "dealing in securities" can be thin, and FINMA's interpretation has shifted toward broader coverage.

Singapore: MAS framework under the Payment Services Act

Singapore regulates crypto OTC activity under the Payment Services Act (PSA). OTC desks that provide digital payment token (DPT) services, which includes buying and selling crypto, need either a Standard Payment Institution (SPI) or Major Payment Institution (MPI) license from MAS.

The SPI license applies if your monthly transaction volume stays below SGD 3 million and your daily e-money float (if applicable) stays below SGD 5 million. Above those thresholds, you need an MPI license.

SPI license for OTC:

Base capital requirement: SGD 100,000
Application timeline: 3 to 9 months
Legal and compliance setup costs: SGD 80,000 to SGD 200,000
Annual compliance costs (AML officer, audit, reporting): SGD 100,000 to SGD 250,000

MPI license for OTC:

Base capital requirement: SGD 250,000
Security deposit: SGD 100,000
Application timeline: 6 to 12 months
Significantly higher ongoing compliance obligations including quarterly reporting and annual audit

MAS has been selective. Several OTC-focused applications have been rejected or withdrawn after extended review periods. MAS scrutinizes the source-of-funds frameworks particularly closely for OTC businesses, given the high-value, low-frequency nature of OTC trades and the attendant money laundering risks.

One practical consideration: MAS requires a physical presence in Singapore with at least one director who is a Singapore citizen or permanent resident. OTC desks that want to serve Asian clients remotely from another jurisdiction cannot use a Singapore license as a letterbox.

UAE: VARA provisions for OTC services

Dubai's Virtual Assets Regulatory Authority (VARA) includes OTC services as a distinct licensed activity category. This is unusual. Most jurisdictions fold OTC into broader exchange or brokerage licensing. VARA explicitly recognizes OTC as a separate business model.

The VARA OTC broker-dealer license requires:

Minimum capital of AED 5 million (approximately $1.36 million) for a full OTC license
Client fund segregation with a VARA-approved custodian
Transaction reporting to VARA on a T+1 basis
Compliance officer and MLRO based in the UAE
Annual audit by a VARA-recognized firm

The capital requirement is significant and intentionally so. VARA wants large, well-capitalized OTC desks, not small brokers facilitating trades from a co-working space. Application fees run AED 100,000 ($27,000) with annual supervision fees on top.

Abu Dhabi's ADGM and its Financial Services Regulatory Authority (FSRA) take a similar approach, licensing OTC activity under its dealing in investments category. Capital requirements at ADGM start at $250,000 but can be higher based on the FSRA's risk assessment of the applicant.

Common compliance failures in OTC licensing

Having reviewed enforcement actions and regulatory guidance across these jurisdictions, the same failure patterns appear repeatedly:

Inadequate source-of-funds verification. OTC clients transact in large sizes. A client wiring $2 million for a Bitcoin purchase needs source-of-funds documentation proportionate to the amount. "I'm a successful businessman" is not documentation. Regulators expect bank statements, tax returns, sale agreements, or other evidence tracing the funds to a legitimate origin. OTC desks that skip this step, or accept cursory explanations, are the ones that face enforcement action.

Poor transaction monitoring. Many OTC desks use manual processes for transaction monitoring. This works when you process five trades a week. It fails at 50. Regulators expect systems, not spreadsheets. The cost of a proper transaction monitoring solution runs $20,000 to $80,000 annually, which OTC operators often resist paying until an audit forces the issue.

Treating the license as a one-time expense. Licensing is the beginning of compliance, not the end. Annual audits, regulatory reporting, staff training, and policy updates are ongoing costs. An OTC desk budgeting $100,000 for licensing but zero for annual compliance is building toward a regulatory problem.

Operating across borders without understanding each jurisdiction's reach. An OTC desk licensed in the UK that takes a call from a client in Singapore is potentially providing unlicensed services in Singapore. Most OTC desks serve international clients. Each client's location can trigger a separate licensing requirement. This is the single most under-appreciated compliance risk in the OTC space.

The practical decision

For OTC desks choosing a primary jurisdiction:

The UK offers the largest addressable market in Europe but the highest rejection rate and the most demanding ongoing compliance. Budget GBP 150,000 to GBP 300,000 for the first year all-in.

Switzerland provides a well-respected regulatory framework at moderate cost, particularly through the SRO route. Best suited for desks serving institutional European clients. Budget CHF 100,000 to CHF 200,000 for the first year.

Singapore gives access to the fastest-growing crypto market in Asia with a clear licensing framework, but MAS selectivity means the application itself is a material risk. Budget SGD 250,000 to SGD 500,000 for the first year including the MPI route.

The UAE (Dubai VARA) offers the most explicit OTC licensing category but the highest capital requirements. Best for desks already serving Gulf and MENA clients. Budget AED 700,000 to AED 1.5 million for the first year.

Whichever jurisdiction you choose, start the licensing process before you start taking client money. Retroactive compliance is always more expensive than doing it right from the beginning.