Estonian Cryptocurrency Exchange Licence Registration

Estonia has enacted a new Cryptocurrency Exchange licence through the Money Laundering and Terrorist Financing Prevention Act (MLTFPA) under the Financial Intelligence Unit (FIU). Estonia crypto licenses are perhaps the most sought after crypto licenses in Europe due to the governments supportive regulations that have allows the industry to thrive. The program came into being in November of 2017 introducing two different types of licenses for cryptocurrency.

Crypto Exchange And E-wallet License

There are two types of licenses in Estonia:

Crypto exchange

A Crypto exchange is for providers, offer a service of exchanging fiat currency against virtual currency which allows you to exchange currency between cryptos and crypto to fiat.

Crypto wallet

For provider of virtual currency wallet services that allows you to provide a wallet services to clients.

Estonia is considered a tech pioneer as it was the first country within the European Union to introduce such forms of legislation leading to a dramatic rise in foreign financial investors. 

In comparison to other similar licences, such as Singapore or Switzerland, Estonia is less than half the price and can be done in under 6 weeks compared to 3-6 months. Estonia is quickly becoming a leading digital and IT jurisdiction because of its attractive financial legislation which has made the crypto licence process simple and straightforward.

   Read about the Swiss Cryptocurrency Licence

Advantages

• Investors enjoy corporate tax exemption on reinvested profits
• Convenient location for an ICO
• Low 14% tax on dividends paid to legal entities
• Options for e-residency card that gives you access to government services
• Can easily set-up and connect EU bank account
• No restrictions on citizenship or residency

Estonia is one of the first nations whose government has adopted blockchain technology in its national digital identification system, health and commercial registry; though the EU rejected its plan to create Estcoin, a national virtual currency, it continues to implement liberal financial regulations that allows the fintech industry to continue to develop. This has created a perfect haven for crypto startups and fintech entrepreneurs giving rise to crypto ATMs, an expansive financial supports system and other emerging forms of virtual exchanges. 

This has largely been a result of Estonia being ranked 1st amongst OECD countries for its internet speed and availability, and its  'ease of doing business' rankings placing it 16th in the OECD by the World Bank and 1st for its International Tax Competitiveness amongst OECD countries. As a result, virtual currencies together with all ICO projects are not subject to VAT or any other forms of taxation. The only taxes incurred on crypto exchanges is when ICO dividends are distributed amongst shareholders.  

Why Choose an Estonian Crypto Licence?

1. Progressive Regulatory Environment: Estonia was among the first European Union countries to implement clear regulations for cryptocurrencies, ensuring legal recognition and a structured framework for crypto businesses. 

2. Unified Licensing: The country offers a single license that ncompasses both cryptocurrency exchange services and wallet services, simplifying the regulatory process and reducing administrative burdens.

3. Efficient Approval Process: Estonian authorities are known for their swift and transparent licensing procedures, allowing businesses to commence operations promptly. ​

4. E-Residency Program: Estonia's innovative e-Residency program enables entrepreneurs worldwide to establish and manage an EU-based company remotely, providing access to Estonia's digital infrastructure and services.

5. Favorable Tax Policies: The country boasts an attractive tax regime, including a 0% corporate income tax on undistributed profits, allowing companies to reinvest earnings without immediate tax liabilities.

6. Robust Digital Infrastructure: Renowned for its advanced digital society, Estonia offers a highly developed IT infrastructure, facilitating efficient business operations and innovation. ​

7. Access to the European Market: Holding an Estonian cryptocurrency license provides businesses with access to the broader European Union market, enhancing credibility and expanding potential customer bases.

Details for a Cryptocurrency Licence

1. 0% taxation on all capital gains
2. 2,500 EUR paid-in capital requirements
3. Local company or foreign-branch office is required
4. One shareholder and one board member required (can be the same person) together with 3 council members
5. Corporate shareholders are allowed (but not recommended as criminal records need to be provided for every member in the shareholder company)
6. Must fill out KYC and AML regulatory policies
7. Can establish company and financial licence remotely 
8. Local physical office required
9. Annual submission of financial accounts is required
10. One management board member required to ensure financial compliance
11. Easy and quick formation application

How to Apply For a Cryptocurrency Exchange Licence? 

In order to start the process, you will need to

• Submit the registration application and pay the registration fee (145-190EUR)
• Register for VAT & employees
• Register your company

The documents that you will need are:

• Clean criminal record of all members
• CV 
• Local office
• Business plan
• AML verification
• Passport copies of all members
• Proof of address

Documents must be in English or Russian and certified with an apostille no older than 3 months. 

What is the License Process?

To apply for licence whether it is the cryptocurrency exchange license or the cryptocurrency wallet it must be done through a company that is registered in Estonia or through a registered branch office in Estonia of a foreign company. The steps are straightforward:

1. Registration of an Estonian Company (1 week)
2. Submission of Documents and application together with the government licence fee 345 EUR
3. We receive status of the application and whether FIU compliance offer requires any more information or an interview
4. Upon receipt of the licence registration document (30 days) we will notify you of the outcome
5. Creation of an EU bank account can begin to link your Estonian financial company and exchange with an account

UPDATE

The FIU as of 17 April 2019 has a new policy whereby the FIU has a right to contact the individual for a meeting before the issuing of the cryptocurrency licence. The new directive comes as a way to continue to combat fraud and money laundering. In case of a meeting request, the client must meet with FIU officials in Estonia within 30 days. Though this happens rarely, it is a possibility. If a meeting is requested and the client does not make it to Estonia within the given deadline, the licence will be rejected.

Further Update: Please note: Due to the difficulty noted above, and the slightly more difficult nature of getting a crypto licence in Estonia at the moment, (due to the authorities tightening of regulations as they are trying to prevent fraudulent crypto schemes from emerging) we are currently recommending clients to get a crypto licence in Lithuania. While we understand the tightening of regulations in Estonia in an attempt to root out negligence, this has been at the expense of legitimate crypto enterprises. As a result, Estonia is no longer as as supportive as it once was to the crypto community.

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Go Deeper >> Estonia as a Crypto Tax Haven