Well into 2025, FinTech founders face not just a problem of making a market-fitting product, but also a whole minefield of regulations.
With the rapid regulatory shifts and the overall development of frameworks worldwide, setting up a company for FinTech operations has become harder than ever before. Many still disregard this step, even though it creates the foundation for the success of any business.
In fact, how meticulously you form and structure your company, from jurisdiction to licensing pathway, directly shapes how well you can navigate the compliance challenges, which are plenty. Company formation is your first line of defence against fines, delays, and grave reputational damage. To enter this stage with expertise and precision, consider the most common compliance challenges laid out in this article.
Challenge 1: Navigating Licensing & Regulatory Perimeters
Different jurisdictions, onshore and offshore, define FinTech activities differently. Take MiCA in the EU as a prominent example: among other things, it has established a sharp distinction between asset-referenced tokens (ARTs) and e-money tokens (EMTs). While bringing clarity, this split also caused new licensing nuances for token issuers registered in the Member States.
Offshore hubs have their own frameworks and processes. For instance, offshore company formation offers ease and speed of incorporation unrivalled by most traditional jurisdictions. Other benefits, like low or zero taxation, minimal or absent reporting requirements, and even shareholder privacy, make such countries appealing to a wide scope of entrepreneurs.
Various FinTech activities, like banking, investment, insurance, Forex trading, and even online gambling, fall under different regulatory umbrellas, each with its own compliance nuances. Depending on the type of company you intend to form and authorize, navigating differences in regulatory requirements is crucial. Without proper knowledge or side assistance, you risk compromising on compliance and, therefore, the reputation of your business.
What Can Be Done
There are several ways in which you can bridge the gaps in compliance, even without sufficient knowledge of the existing frameworks and their differences.
- Choose a jurisdiction that aligns with your core services and growth roadmap.
- Use phased licensing: for example, start with an EMI license in the EU, then expand to CASP under MiCA.
- Draft a regulatory business plan during incorporation to avoid future pivots.
By having an exact plan of action, you safeguard your company from regulatory risks. Allocate the most time to choosing an appropriate jurisdiction: the local framework must cover your activities in full, providing a substantial legal basis for each. A consultant with experience in FinTech company formation and licensing can assist you in drafting a compliance roadmap.
Challenge 2: AML/KYC Compliance from Day One
Meeting Anti-Money Laundering (AML) and Countering the Financing of Terrorism (CFT) requirements is one of the most immediate and complex hurdles for FinTech startups. Regulators expect companies to verify customer identities (KYC), screen against global sanctions lists, and monitor transactions for suspicious activity. The Travel Rule adds another layer, requiring firms to share sender and recipient information for cross-border transfers above certain thresholds.
For a new company, this creates friction in two areas: onboarding (where long verification processes can drive customers away) and transaction monitoring (where inadequate systems risk regulatory fines and reputational damage). Without a solid framework in place from the beginning, startups can find themselves stuck between slow user growth and non-compliance penalties.
What Can Be Done
Adhering to the AML-CFT, as well as KYC requirements, is an obligatory step in company registration and licensing. However, it is also the most intricate one and might be difficult to navigate without the help of a professional. As a preemptive measure, you can try:
- Register in a jurisdiction with a transparent and reputable AML framework (e.g., UK FCA, Singapore MAS) to establish market credibility.
- Embed AML/KYC obligations directly into the company bylaws and shareholder agreements to ensure alignment at the governance level.
- Establish a compliance function from the start by appointing a Money Laundering Reporting Officer (MLRO) or Chief Compliance Officer (CCO) during the incorporation stage.
While not obligatory everywhere, a Money Laundering Reporting Officer is often an incorporation/licensing requirement in jurisdictions across the EU and in heavily regulated onshore locations. Consider looking for a fitting candidate early on to prevent licensing delays later.
Challenge 3: Drafting Clear Governance & Ownership Structures
Regulators and investors expect companies to have transparent ownership and well-defined governance mechanisms. When structures are too complex, such as multi-layered offshore holdings, nominee arrangements, or unclear shareholder rights, they create uncertainty and can delay licensing approvals or investment decisions.
From a regulatory standpoint, vague structures raise concerns about beneficial ownership and potential money laundering risks. From an investor’s perspective, a lack of clarity in governance often signals potential conflicts or difficulty in scaling the business. In both cases, unclear structures become red flags that stall growth.
What Can Be Done
To ensure transparent ownership and a clear image in the eyes of authorities and investors, consider the following steps:
- Keep shareholder structures simple and transparent. Avoid unnecessary holding layers or nominee arrangements that make it difficult to identify ultimate beneficial owners; regulators will review this during licensing.
- Include compliance oversight responsibilities in board charters from the start. Clearly assign accountability for AML, risk management, and audit functions at the board level to demonstrate strong governance.
- Prepare shareholder agreements that allow for governance flexibility as you scale. Anticipate future fundraising, potential exits, or the addition of strategic partners by drafting adaptable agreements that balance investor rights with operational efficiency.
Keep in mind that certain jurisdictions require businesses to keep the identity information of beneficial owners and shareholders in public registers. It would be wise to research the stance of your chosen location on beneficiary and shareholder privacy in advance or refer to a certified corporate lawyer for a consultation.
Challenge 4: Meeting Share Capital Requirements
The financial aspect, especially the share capital requirement, is a frequent pain point for entrepreneurs. Many jurisdictions require FinTech projects to hold a minimum level of share capital to prove financial stability and proper funding of the business activities.
Insufficient capital at incorporation can cause licensing delays. Furthermore, tightly regulated jurisdictions can turn down a licensing application if the company hasn’t accumulated the minimum required capital before making the submission. Some regulators also require the share capital (or a certain part of it) to be deposited into the company’s bank account, which should already be created and active at the time of licensing.
What Can Be Done
Meeting share capital requirements isn’t just a regulatory checkbox, it’s a strategic decision that can influence funding, investor confidence, and licensing timelines. Proper planning from day one helps avoid delays and keeps your growth trajectory on track.
- Plan capital injection in line with the chosen license type. Different licenses have different minimum capital requirements; ensure that the funds are available and properly documented before incorporation or license submission to satisfy regulators.
- Structure shareholder agreements to allow for quick fundraising rounds without losing control. Build in flexibility for future investors while preserving founders’ decision-making power, so you can respond to opportunities without governance conflicts.
- Consider phased capital increases aligned with growth milestones. Instead of committing the full amount upfront, plan incremental injections tied to key business targets: this eases financial strain while maintaining regulatory compliance.
By approaching share capital strategically, you not only meet regulatory requirements but also create a foundation for sustainable growth and investor confidence. Proper planning now avoids costly delays and ensures the company can scale efficiently.
Challenge 5: Handling Ongoing Reporting & Recordkeeping
If you already have some experience in building and registering a FinTech company, then you probably know that compliance doesn’t stop after formation or after licensing. FinTech faces ongoing obligations, such as financial reporting, transaction monitoring, and audits. Notably, these obligations are more stringent in onshore jurisdictions and under heavy frameworks, like MiCA in the EU.
In fact, startups and young businesses often underestimate the operational load of ongoing compliance. It is required to keep track of all business and financial operations, transactions and expenses, and other internal movements of the company all the time. By the time you have to file monthly, quarterly, or yearly reports, even small oversights can trigger regulatory scrutiny, fines, or delays in business activities.
What Can Be Done
Ongoing compliance is not optional; it’s a continuous operational responsibility that can make or break a FinTech business. Planning for reporting and audit processes from the start reduces risks, saves time, and ensures that your company can scale without regulatory disruptions.
- Set up reporting calendars at incorporation. Map out all mandatory filings to ensure nothing is missed. Early scheduling helps teams stay organized and avoids last-minute rushes that can lead to errors.
- Use RegTech tools or outsourced compliance support to meet filing deadlines. Automate routine reporting, monitor transaction compliance, and get real-time alerts for regulatory obligations to maintain accuracy and efficiency.
- Build an internal audit trail system from day one. Track all financial transactions, internal approvals, and operational activities to create a clear, easily accessible record for regulators and auditors.
By embedding these processes into your company from the beginning, you minimize the risk of non-compliance, demonstrate strong governance to investors, and ensure your FinTech can operate smoothly under even the strictest regulatory frameworks.
Challenge 6: Protecting Customer Data & Building Trust
FinTech companies have to deal with and handle highly sensitive personal and financial data of their customers. This is a point of great concern, especially for projects that deal in the crypto or online gambling sectors. Weak data protection mechanisms can damage client and investor trust and, consequently, increase compliance risks. Beyond regulatory requirements like GDPR in the EU or equivalent privacy frameworks in other jurisdictions, FinTechs must anticipate evolving cybersecurity threats.
Data breaches, ransomware attacks, or even accidental leaks can have severe financial and reputational consequences. Establishing robust encryption, access controls, and secure storage practices from day one not only mitigates these risks but also demonstrates a commitment to client trust, which is crucial for long-term business sustainability and investor confidence.
What Can Be Done
Protecting customer data is not just a legal obligation; it’s a cornerstone of trust and credibility for any FinTech. Laying the groundwork for sufficient data governance at incorporation ensures compliance, reduces risk, and signals to clients and investors that their information is safe.
- Appoint a Data Protection Officer (DPO) or equivalent early on. Assign clear responsibility for overseeing data privacy, monitoring regulatory compliance, and handling client inquiries or breaches to ensure accountability from day one.
- Draft privacy and data policies as part of the initial legal framework. Create comprehensive policies covering data collection, storage, sharing, and retention to satisfy regulatory requirements and clearly communicate practices to customers.
- Choose technology partners who meet international security standards. Ensure that any third-party platforms, cloud providers, or payment processors adhere to ISO, SOC 2, or equivalent standards to maintain end-to-end data protection.
By embedding these measures at the formation stage, FinTechs can prevent costly breaches, maintain regulatory compliance, and build a reputation for reliability and trustworthiness in a highly competitive market.
A Universal Solution: Consulting a FinTech Compliance Expert
Facing FinTech registration challenges alone is daunting, especially for startups: a single mistake can put the compliance at risk and lead to reputational damage. LegalBison has extensive experience guiding FinTech companies through incorporation and licensing. For over five years, the firm has supported startups and established players alike, helping them navigate complex compliance requirements with confidence.
Entrusting your company registration to a legal professional is a cost-effective and proven way to overcome obstacles with ease. A professional agent who knows the intricacies of FinTech incorporation and licensing worldwide can find an individual approach to your project and provide a clear, fast, and effective solution for building your business. With the assistance of a legal advisor, you can delegate the compliance challenges and concentrate on scaling your operations instead.
Conclusion
Launching a FinTech startup in 2025 is as much about regulatory precision as it is about product innovation. Each compliance challenge, from licensing and AML/KYC to governance, share capital, reporting, and data protection, represents not just a legal requirement but a strategic opportunity to build credibility, attract investors, and scale sustainably.
Ignoring these steps, or treating them as a checkbox exercise, can lead to delays, fines, or lasting reputational damage. Conversely, incorporating strong compliance foundations from day one allows founders to navigate regulatory frameworks confidently, reduce operational friction, and focus on growth. Strategic decisions made during formation pay dividends far beyond licensing approval.
While the regulatory landscape may seem daunting, the right approach turns complexity into a competitive advantage. Leveraging professional guidance, implementing structured processes, and embedding compliance into your company culture ensures that your FinTech is not only legally sound but also trusted by customers, investors, and regulators alike.
