Cross-Border Expansion in Regulated Industries: Risks and Strategies

Between the two of us, we have taken companies into the United States and Brazil across some of the most tightly regulated categories there are: money transmission, crypto, payments, iGaming. Every client assumes the next market is roughly the same problem in a different country. It never is.

We built our practices on opposite sides of the same border. Josh advises companies expanding into the United States from a Washington, DC firm focused on crypto, fintech, and banking. Rubio runs a full-service consultancy out of Brazil that takes international clients through licensing, compliance, and market entry across Latin America. Comparing notes, the pattern holds. Companies that succeed treat cross-border expansion as a strategic decision made months in advance. Companies that struggle treat it as paperwork handled after they have already committed to a market.

Here is what we have learned moving clients in both directions.

Two Regulatory Philosophies, One Ocean Apart

The United States regulates money transmission state by state. Fifty different money transmission acts, fifty different triggers for when a license is required, and in a handful of states now, a second license just for anything involving crypto:

• New York: the BitLicense
• California: the DFAL
• Louisiana: its own separate crypto license

A company operating nationally could be looking at a federal MSB registration plus up to fifty-four separate state licenses, each with its own bond, filing fee, and renewal cycle.

Brazil works the other way. Power sits with the federal government and the central bank, so a company entering Brazil answers to one regulator instead of fifty. That does not make it simple. Brazil's crypto framework rests on central bank decrees rather than settled law, which means the rules can shift before a company finishes building around them. Centralized is not the same as certain.

“Fifty different states, fifty different rules. It's great for lawyers. It's not great for companies.”

The Real Cost of Getting Licensed

A federal MSB registration in the US can take as little as three business days. State licensing is a different story. New York alone has taken us close to two years for clients pursuing both the money transmitter license and the BitLicense, largely because the state runs a genuinely deep review of the business plan, flow of funds, and financial projections. Its annual renewal fee runs roughly $375,000, close to 300 times what most other states charge.

Brazil moves faster and, depending on the route, can look far less expensive. A license for a payment institution or a bank can run two to three million dollars, but a company entering through M&A, buying an already-licensed entity, can be operating in around six months. For a US company weighing years of state-by-state licensing, buying into Brazil can be both the faster and the cheaper path.

Buying Your Way In Beats Building From Scratch

Licensing from zero and acquiring a regulated entity run on two different clocks. In the US, we structure sub-license relationships regularly, where a partner runs its regulated flow of funds through an already-licensed entity instead of filing for its own license. It works only if the entire regulated portion of that flow runs through the licensed partner without exception.

In Brazil, M&A is often the more direct route into a market that otherwise requires local presence and years of relationship-building. That is increasingly true in iGaming, where Brazil now requires every stakeholder, operators, platform providers, data providers, to maintain a physical presence in the country. Buying into an existing presence is the shortcut.

The Local Partner Is Not a Convenience, It Is a Requirement

Every jurisdiction we work in requires some version of the same thing: someone local who represents the business to the government and, in effect, becomes its face. That partner typically has to:

• Stand as the face of the business to local regulators and government bodies
• Be trusted with sensitive matters, from visas to moving money out of the country
• Know exactly where the legal limits sit, since the downside in regulated industries can go well beyond lost revenue

In the most serious cases, the downside is an enforcement action, or personal liability. This is why we tell clients the same thing regardless of direction. Find the partner before you need one. A relationship built under pressure, after a regulator has already asked a hard question, is a far worse position than one built early.

“If you don't trust the people representing you on the ground, you cannot even withdraw your own money.”

Bring Compliance In Before the Business Has Already Decided

The mistake we see most often is legal and compliance getting looped in after the business has committed to a market. By then, the entity structure, vendor contracts, and sometimes the marketing are already set, and unwinding those decisions costs more than getting them right the first time. We recommend a compliance officer, or a combined compliance and data protection role, from the earliest planning conversations, not after the first regulator inquiry.

Individual considerations follow the same logic. Founders based in Brazil are increasingly asking us about restructuring personal tax residency as the country's tax reform pushes rates higher, a parallel track to the corporate expansion that needs the same lead time.

The Bottom Line

Cross-border expansion in a regulated industry is never just a legal filing. It is a decision about which regulator you answer to, which partner represents you on the ground, and how much runway you give yourself before you need to be operating. The jurisdictions we work in reward patience and preparation, and they are unforgiving toward companies that assume their home market's rules, or its timeline, will simply carry over.

Cogent Law advises companies on fintech, blockchain and cryptocurrency matters, money transmitter licensing, and corporate structuring for market entry. Contact us to discuss a cross-border expansion.