TBA & Associates

Crypto Licensing in Estonia

Estonia stands out as an accommodating and welcoming destination for a variety of activities related to virtual currencies. Over a relatively brief period, the nation has earned a reputation as a “cryptocurrency haven” due to its forward-thinking legislative framework.

Distinguished as the first European Union member state to regulate cryptocurrency companies, Estonia has witnessed a surge in entrepreneurs, exchanges, and exchangers establishing physical offices within its borders. More than 2,000 businesses have successfully acquired cryptocurrency licenses in the past five years.

Entrepreneurs frequently opt for Estonia as the base for their crypto-related ventures, including Initial Exchange Offerings (IEOs), Initial Coin Offerings (ICOs), and Initial Dex Offerings (IDOs), and often choose to scale their operations within the country. The number of active entrepreneurs continues to grow steadily.

Despite legislative adjustments in 2021, the Estonian cryptocurrency license remains economically viable compared to alternatives in other countries. Remarkably, the rigorous nature of the legislation is not seen as a drawback but rather as a considerable market advantage.

Presently, virtual currencies are subject to regulations similar to fiat money, having been legitimized and placed on equal footing with alternative forms of payment. This provides a distinct advantage over jurisdictions where cryptocurrencies operate within a legal “gray area.” Estonia is now recognized as a viable alternative to traditional cryptocurrency hubs like Malta and Switzerland, owing to its favorable legal environment for regulating cryptocurrency activities, attractive tax policies, and reduced licensing costs.

Requirements to Obtain a Crypto License in Estonia

According to the most recent amendment to the Anti-Money Laundering and Counter-Terrorist Financing Act, all operational crypto businesses and those seeking licensure must furnish the regulator with requisite documentation, establish a physical office, and appoint local management.

The Estonian Financial Intelligence Unit (FIU) is responsible for issuing licenses to virtual value service providers. Information such as company details, license numbers, and the person overseeing compliance with requirements is publicly accessible in the electronic version of the register. Upon registration, a crypto company is conferred Financial Institution (FI) status.

With the introduction of new legislation, various license types have amalgamated into a unified category known as “Virtual Asset Service Provider,” encompassing activities such as crypto exchanges and wallet services.

Procedures to Obtain a Crypto License in Estonia
“Three Step Process”

The licensing process typically takes approximately five months, with an additional 2-3 weeks needed for the license holder to become fully operational.

Phase 1
Company Incorporation
Expected Timeframe: 2-3 weeks

The company undergoes registration, and a local director is appointed and employed. A corporate account is established.

Gathering an initial set of documents from the Client’s side:

  • A current copy of the passport from the country of residence (scan)
  • A brief business model for the company (1-2 A4 pages)
  • Provision of a preferred company name
  • Approval of budgets and project scope based on the initial workshop
  • TBA & Associates operational department drafts a Power of Attorney (PoA) and shares it with the Client, along with the subsequent steps

Company establishment:

  • Upon receipt of the documents (hard copies) at the Estonian office, a sworn translation into Estonian is carried out
  • The notary deal is arranged and conducted; the company’s entry appears in the commercial register after 5 days
  • A set of corporate documents is prepared
  • The corporate account is opened • The Client transfers the share capital to the company

Phase 2
Expected Timeframe: 2-3 weeks

The company aligns with Estonian VASP requirements. An AML/KYC policy is drafted, and employees are prepared.

Preparation of legal, financial, and IT documents (non-exhaustive list):

  • Description of the company structure
  • Compliance documentation (AML/KYC/KYT)
  • Business plan, financial documentation, and forecasts
  • Description of technical solutions used
  • Internal control procedures

Establishing relationships with partners and employees:

  • Hiring an AML Officer and other employees
  • Identifying premises and concluding a rental agreement
  • Entering preliminary agreements with partners (liquidity providers, KYC/KYT solutions, custody solutions, etc.) Providing staff training

Phase 3
Expected Timeframe: 2-3 months

The company obtains a VASP license and is prepared to offer virtual currency services.

Submission of the license application:

  • Preparation of the application
  • Collection of additional documentation as required by the regulator
  • Establishment of contact with the regulator

Support in the licensing process:

  • Negotiations with the regulator
  • Clarification of the business model and established policies
  • Amendment of documents and provision of additional information

Corporate Maintenance

All necessary arrangements for the company are completed, and the VASP license holder is fully operational.

This phase is crucial for supporting and maintaining the structure, which may include:

  • Notarized corporate documents (Register Card, AoA, MoA) for account opening
  • Internal control services
  • Experienced accountant in Cryptocurrency
  • Assistance with customer complaints
  • Audit of AML/KYC procedures
  • Periodic employee training
  • Representation during regulator supervision
  • Preparation of legal opinions

Estonia Crypto License

  • The company must have a corporate account opened at an Estonian Bank or a European Payment Institution authorized to provide services in Estonia.
  • The minimum share capital for an Estonian VASP company should amount to 12,000 EUR.
  • The company is required to maintain a physical office in Estonia equipped with the necessary facilities.
  • At least one board member must be a resident physically located in the country and actively participate in the company’s activities.
  • All significant stakeholders (shareholders, directors, key employees) must maintain good standing, evidenced by providing the regulator with certificates of no criminal record in their respective countries of citizenship.
  • The company must adhere to its AML/KYC policy, risk control, and monitoring rules.
  • The Estonian VASP company is obligated to store and maintain client data, which can be provided to the regulator if necessary.
  • The company is obliged to regularly collect KYC (customer due diligence) data from clients.
  • Company directors and the AML officer are required to possess profile education, skills, and experience relevant to the cryptocurrency activities of company employees.

Benefits to obtain a Crypto License in Estonia

Numerous crypto companies choose Estonia as their base of operations for several compelling reasons that make conducting business across Europe highly advantageous.

Firstly, an Estonian crypto company enjoys the benefits of clear and fair regulation. The Estonian AML Act and related provisions establish transparent rules, providing the licensed company with clarity on permissible actions and ensuring compliance with the law.

Additionally, Estonia offers a favorable business environment. Almost all aspects of establishing and running an Estonian company can be conducted entirely online, thanks to the e-Residency program. Recent data reveals that Estonian e-Residents worldwide contribute over 1 billion euros in economic activity through their Estonian companies.

Moreover, Estonia boasts a corporate tax-free landscape. Instead of a corporate tax, only distributed profits are usually subject to a 20% corporate income tax, offering companies the opportunity to reinvest their profits tax-free under the Estonian taxation scheme.

Our company licensing services

— What we do and do not do

Our company is EXCLUSIVELY engaged in assisting worldwide clients, either individuals or corporate entities, to get duly and properly licensed with local Regulators and Financial Authorities to get respective official licenses to legally carry out their cryptocurrency or financial related business activities.

TBA & Associates Tax Business Advisors does not provide or carry out any sort of Cryptocurrency or Financial services!

Disclaimer: While TBA & Associates strives to make the information on this website as timely and accurate as possible, the information itself is for reference purposes only. You should not substitute the information provided in this article for competent legal advice. Feel free to contact TBA Customer Services for advice on your specific cases.

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