Estonia is one of the European countries in which cryptocurrency is strictly regulated, therefore setting up such a company here is very safe nowadays.
Cryptocurrency is a digital asset created to act as a means of exchange to secure the transactions and to control the generation of additional currency units. Our Estonian company formation consultants can offer thorough information on the criteria which are imposed to set up a cryptocurrency company in Estonia and the costs which are involved with such a start-up.
Our company formation consultants in Estonia can help foreign investors who want to set up cryptocurrency and blockchain businesses in this country. We can also provide complete assistance to those who wish to obtain an Estonia crypto license.
Legislation on cryptocurrency in Estonia
In 2014, the Tax and Customs Board of Estonia made public a document named Taxation of Trade in Bitcoins. Our company formation agents in Estonia can provide full details on the taxation of cryptocurrency operations.
This was the first governmental statement related to bitcoins in Estonia which followed the approach of the European Central Bank and the Financial Action Task Force (FATF), acknowledging bitcoin as a decentralized virtual currency.
Under this document, the bitcoin in Estonia is recognized as an alternative means of payment by legal status.
The bitcoin is not regarded by the financial and tax authorities in Estonia as any type of security or e-currency.
As a result, all persons and companies effectuating bitcoin transactions have to be registered as providers of business services. Additionally, requirements to obtain an Estonia crypto license are also in place.
Apart from the 2014 legislation which was the first law on cryptocurrencies, in 2017 the Estonian government also amended the Anti-Money Laundering Law which now provides for improved regulations imposed on the operations of cryptocurrency companies.
Under the new law, the following aspects of the use of cryptocurrencies have been improved:
- Definition: cryptocurrencies now benefit from a clear definition which states they are digital values which can be transferred, preserved or traded by natural persons and which can be accepted as a payment method by companies;
- Wallet: cryptocurrency wallets have also been defined as storage solutions for digital tokens;
- Estonia crypto license: the types of licenses available for those setting up cryptocurrency companies have also been established;
- Obligations: the obligations of cryptocurrencies have also been defined under the new law; the obligation of obtaining authorization from the Financial Intelligence Unit in Estonia.
Another important aspect of the new regulations imposed on cryptocurrency companies in Estonia is that the local law does not impose any restrictions for these companies to operate outside the country. However, it should be noted that in this case, the company will need to comply with the legislation in the country it will offer its services.
The income which derives from bitcoin transactions is regarded as a capital gain from a taxation point of view, being taxed accordingly. Our company registration advisors in Estonia can offer more details on the taxation imposed on this type of transactions in this country.
The registration process for a bitcoin company in Estonia
- the cryptocurrency exchange service provider license;
- the cryptocurrency wallet service provider license.
The Estonia cryptocurrency exchange license will enable the Estonian company to provide exchange services to those interested in trading cryptocurrencies against money or against other cryptocurrencies. The second type of license is issued for companies offer virtual token wallets or e-wallets.
Our team of experts can help those interested apply for an Estonia crypto license of their choice.
There are also other types of cryptocurrency businesses which can be established in Estonia. These do not require any special license as they will not be involved in trading activities. Among these, the most common ones are IT companies involved in digital token mining activities. Also, cryptocurrency companies can also handle the installation of virtual money ATM machines.
Our local specialists in company registration in Estonia can advise on the registration of any type of cryptocurrency business.
How do investors obtain a crypto license in Estonia?
The applications for one of the two cryptocurrency licenses mentioned above must be filed with the Financial Supervisory Authority through the Financial Intelligence Unit. The documents that need to be submitted are not many, among them the most important ones being the company’s Certificate of Incorporation and the Know Your Client and the risk assessment documentation.
The granting of the Estonia crypto license is subject to regulation changes as the Estonian government is set to impose more complex regulations under a new bill for issuing virtual currency activity licenses to companies engaged in the sale and/or purchase of virtual currencies as well as companies that provide virtual wallet services.
Some of the most important regulations for those who apply for a virtual currency activity license include the following:
Investor suitability: the Financial Intelligence Unit will conduct a comprehensive background check on the company owners;
Registered address: an important requirement is that the registered address of the company and the activities are to be located in the country; the board must also be based in Estonia;
The state fee: for the Estonia crypto license is set to increase, from 345 EUR to 3,300 EUR; our team can provide complete details on the fees in force;
The issue date: the entire licensing process will become lengthier as a result of the overall more complex verification procedures.
Companies in Estonia that already hold a license for cryptocurrency-related activities are required to comply with the regulations that will become mandatory for this purpose and are asked to submit additional information to the Financial Intelligence Unit, as needed. Some of the issues that will need attention, in case of those that already have a license, can be those related to the suitability and the reputation of the company owners. Our team can provide more details and can help companies that are already have an Estonia cryptocurrency exchange license or another type of license comply with the ongoing requirements.
Until the license is granted, the Estonian company is not allowed to start its activities.
How long does it take to obtain an Estonia crypto license?
Estonian authorities have expressed the need for a comprehensive regulation for granting the Estonia crypto license and in 2019, when the first reading of a draft law proposing new changes was read in parliament, the Minister of Finance mentioned the increase in the number of license applications:
- in 2018 there were 1,430 licenses submitted to the Estonian Financial Intelligence Unit;
- the same year, 1,182 applications were for activities related to providing services for virtual currencies;
- 629 of these applications were for an Estonia cryptocurrency exchange license;
- 533 applications were for the provision of virtual wallet services.
While presenting these numbers, the Minister of Finance highlighted the fact that the Financial Intelligence Unit is not able to assess the suitability of each applicant and, in practice, it cannot verify the activities undertaken by license holders. The aim of the more stringent regulation for companies is to reduce the risk of money laundering and the Estonian Government intends to take the necessary steps to pay close attention to these illegal practices.
As a result of the proposed legislation, and the changes that are to be brought to the laws that regulate cryptocurrencies, investors who apply for an Estonia crypto license can expect that the term for granting the license to extent from approximately 30 business days to almost 3 months. Entrepreneurs, both local and foreign, do not need to be deterred by the increased period. Our team can make sure that the application is submitted according to the regulations in force so that the company that requests the license has the change to receive a positive answer from the regulator. By working with our agents, you can make sure that the application is not rejected based on incomplete or incorrect filings.
The draft law proposed in Parliament makes it mandatory for the Financial Intelligence Unit to examine the background of the company members and their activities. For this purpose, company owners in Estonia to intend to engage in cryptocurrency-related activities will need to have an impeccable background and reputation. Moreover, foreign companies that wish to engage in these activities in the country will need to open a branch in Estonia. As fer as this verification is concerned, it is not uncommon in the financial services sector and it is sometimes referred to as the “fir and proper” condition for the investor. For the purpose of obtaining an Estonia cryptocurrency license, it means that the license holder needs to have a good reputation as a professional and needs to meet the highest standards in the industry. Like the case of fiat money, the licensee will take care of the client’s virtual currencies and he needs to be verified.
When obtaining an Estonia crypto license, companies that wish to engage in activities related to virtual currencies can reach out to our specialists who can provide updated information on the laws in force and how the Estonian authorities plan to regulate these activities. We also invite you to watch a video on this subject:
Why start a cryptocurrency company in Estonia?
Estonia is one of the most advanced countries in Europe and in the world from a technological point of view. Estonia’s digital transformation started in 2008 when blockchain technology was used for the first time. Ever since Estonia has come a long way, permitting foreigners to open companies remotely and accessing all governmental services from a distance.
Estonia is now continuing the development of blockchain technology by allowing local and foreign investors to set up various types of companies related to trading cryptocurrencies. Moreover, Estonia was the first country in the European Union to provide for activities related to the issuance and trade of digital tokens to be undertaken by companies and natural persons.
In case you need to know more about the bitcoin industry in Estonia or to set up a legal entity in this country, please speak to our friendly company formation representatives in Estonia. You can rely on our company registration representatives for full information and assistance related to the preparation of the documents needed to create a cryptocurrency company and obtain the Estonia cryptocurrency license.