Why You Should Get Your Crypto License in Estonia
Estonia is known globally for its head-on approach to innovation, digitalization, and cyber security. Since the invention of blockchain technology, the Estonian government and local entrepreneurs have been one of the pioneers in utilizing it. This has led to the point where you can incorporate a business and obtain a crypto license in Estonia. Having a license enables you to offer virtual currency services legally in Estonia while managing your business locally or from abroad.
Regulatory Compliance Associates is eager, available, and open to discuss your requirements – please do not hesitate to reach out to us!
3 Reasons Why You Should License Your Crypto Business in Estonia
Compared to other favorable jurisdictions like Malta, Japan, Switzerland, or Singapore, which are popular among entrepreneurs to establish a business that deals with virtual currencies, Estonia may have a couple of advantages.
1. Fair and innovative legal framework
Estonia was one of the first countries in the world to start regulating the virtual currencies industry. Since 2017, the Estonian Money Laundering and Terrorist Financing Prevention Act defined that virtual currency exchange providers and custodial wallet services require authorization from the government. This means that a financial license must be acquired before you can provide such services. Making the industry more transparent and having legal a set of legal requirements helps guide businesses in the right direction. Also, it helps customers to have more peace of mind while using such services, knowing that the company is being supervised and has met the legal requirements.
Virtual currencies are treated as property in Estonia. This means that some businesses can be established by making the share capital contribution with Bitcoins and Altcoins as a non-monetary contribution. This is very innovative and increases flexibility when assets are already as virtual currencies.
Estonia is one of the handful of countries in world, which is open to international entrepreneurs remotely. Anyone who wishes to establish a business in the world’s most digitally advanced nation can do so. Obtaining the e-Residency card is easy and it enables foreigners to access all Estonian e-Services which are offered by the government. The card is also useful for signing documents digitally and remotely. By being an e-Resident, you will save time and money which would be spent on bureaucracy while starting and managing a business.
3. Favorable tax policy
In 2021, Estonia was selected as the most competitive tax environment among the OECD countries and this for the eighth year in a row. This is mostly due to low tax burdens, and especially the fact that reinvestment of business profits are not taxed.
Furthermore, in Estonia, crypto assets are exempt from VAT and are treated the same way as property per the Estonian Income Tax Act. This means that taxation only applies on gains from the sale or exchange of virtual assets, mining or payments for work performed.
Different Cryptocurrency Licenses in Estonia
A virtual currency is a value presented in a digital form that is digitally transferrable, store or traded and accepted as a means of payment by legal or natural persons. However, it is not a legal tender or financial instrument in any EU country. To provide virtual currency exchange, wallet or transfer services in Estonia, a business must acquire a license from the Financial Intelligence Unit, who oversees businesses operating with virtual currencies.
Cryptocurrency Wallet License in Estonia
Cryptocurrency wallet services include generation and storage of encrypted customer keys where diverse types of virtual currencies and/or assets can be stored. To provide such services, a license must be acquired, and customer’s virtual currency must be stored in a way that an overview and some control over the transactions in the wallet.
Cryptocurrency Exchange License in Estonia
Cryptocurrency exchange refers to the nature of services where a customer converts cryptocurrency to FIAT money or vice versa, or from one virtual currency to another virtual currency. To provide exchange services, a license from the FIU is required as well.
Also, if you plan to issue an ICO coin/token and it meets the definition of a virtual currency in the § 3 p. 10 of the Estonian AML law and your company plans to buy or sell it for fiat money, a license must be acquired.
General Requirements to Obtain a Cryptocurrency License in Estonia
1. Persons Involved
The company’s management and beneficial owners must consist of people that do not have a valid offence against the state authorities or money laundering or other crime which was intentionally committed. This also means that they must have a good business reputation, which will be assessed by the FIU during the licensing process.
A member of the management board of a virtual currency service provider must have higher education and at least two years of professional work experience and may not hold the position of a member of the management board of at more than two virtual currency service providers. Furthermore, at least one management board member has to be a local resident and a tax resident of Estonia
2. Registered Office and Place of Business
The registered office, management board and place of business of a company which applies for a virtual currency service provider license must be in Estonia or a foreign company must have a branch office which is registered in Estonia.
A company’s place of business does not have to be the same as the registered office. However, it is the location where activities related to the AML laws by the contact person are performed and where the financial service is provided.
3. AML Compliance Officer/Contact Person
The appointed AML Officer will serve as a contact person for the FIU and has the obligation to oversee compliance per the Estonian AML law. It has been stated that only a person who has the education, professional suitability, necessary abilities, personal qualities, and experience, along with an impeccable reputation, may be appointed as the AML contact person.
Also, the AML Compliance Officer must be in Estonia and go through an interview process before he is approved by the FIU and may not be a contact person or head of a structural unit of another virtual currency service provider.
This means that a business must be careful when selecting their AML Compliance Officer for their Estonian company and is a service which RCA offers.
4. Bank Account and Audit
A virtual currency provider license applicant must have an open payment account at a credit institution, electronic money institution or payment institution established in Estonia or in a country located in the European Economic Area and provides cross-border services or which has set up a branch in Estonia. During the application, all payment accounts must be submitted and a certificate from a credit institution must be provided to prove the existence of the account.
We can help you to assess the suitability of your desired payment account or help to establish an account which is accepted by the FIU during the process.
Since March 2022, all VASPs are required to have their business’ annual accounts audited to ensure transparency within the sector.
5. Share Capital Requirements for a Crypto Business in Estonia
Per the current legislation, the share capital of a new undertaking which is applying for a virtual currency service provider license must be at least 100,000€ or 250,000€, depending on the service which the company provides, which must be paid full in cash. The existence of the share capital amount must be able to be confirmed with the data found in the Estonian e-Business Register.
RCA Can Help You Obtain a Crypto License for Your Business in Estonia
We at Regulatory Compliance Associates have extensive experience with legal matters and with the financial industry in Estonia. We have trained employees of multiple virtual currency businesses and helped numerous businesses to obtain and maintain their virtual currency service licenses in Estonia.
In case you would like to get our help or advice on a legal matter in Estonia, please feel free to contact us!
Disclaimer: This article provides general information, which may or may not be correct, complete or current at the time of reading. No recipients of content from this site should act on the basis of content of the article without seeking appropriate legal advice or other professional counseling.