Crypto license in
Estonia 2024
Estonia has emerged as a welcoming environment for various virtual currency activities, earning recognition as a leading state in cryptocurrency due to its forward-looking laws. As the first country to issue crypto license, Estonia leads the EU in cryptocurrency regulation. This progressive approach has resulted in a surge of entrepreneurs, exchanges, and service providers establishing a physical presence in the country.
The primary regulatory body overseeing crypto licenses in Estonia is the Estonian Financial Intelligence Unit (FIU). The FIU ensures that licensed companies comply with Anti-Money Laundering (AML) and Counter-Terrorism Financing (CTF) regulations.
Legalaes provides professional assistance and support throughout the process of obtaining a cryptocurrency license in Estonia. Our comprehensive service ensures a guaranteed turnkey solution, aligning with Estonia’s reputation as a premier destination for cryptocurrency ventures.
Regulations for Crypto license in Estonia
National Financial Intelligence Unit (Rahapesu Andmebüroo) is overseeing cryptocurrency licensing in Estonia, which now consolidates transactions under a single license for virtual currency service providers.
On the basis of § 70 subsection 1 point 4 of the Act on the Prevention of Money Laundering and Terrorist Financing (RahaPTS), an entrepreneur must have an operating license to offer a virtual currency service. The virtual currency service is the service specified in § 3 points 10 – 10 3 of the Money Laundering and Terrorist Financing Prevention Act (RahaPTS):
- Virtual currency wallet service
- Virtual currency exchange service
- Virtual Currency Issuance or ICO
As of 2024, Estonia has a comprehensive regulatory framework for cryptocurrency businesses that ensures a high level of transparency, security, and compliance with international standards. Here are the key regulations and requirements for obtaining and maintaining a crypto license in Estonia:
Regulatory Framework
Regulatory Framework
Legal Basis
The primary legislation governing cryptocurrency businesses in Estonia includes the Money Laundering and Terrorist Financing Prevention Act (MLTFPA) and the Virtual Currency Service Providers Act.
These laws are designed to align with European Union directives on anti-money laundering (AML) and counter-terrorism financing (CTF).
Regulatory Authority
The Estonian Financial Intelligence Unit (FIU) is the main regulatory body responsible for overseeing cryptocurrency businesses. The FIU grants licenses, monitors compliance, and enforces regulations.
Licensing Requirements
Licensing Requirements
1. Company Establishment
The applicant must establish a legal entity in Estonia. This involves registering the company with the Estonian Commercial Register. The company must have a physical office in Estonia.
2. Capital Requirements
The company must have a minimum share capital of 100,000 EUR for exchange services and 250,000 EUR for crypto wallet custodial services.
3. Management and Personnel
At least one board member must be an Estonian resident or a resident of the European Economic Area (EEA). Key personnel, including board members and the AML officer, must have a clean criminal record and a good reputation.
4. AML/KYC Compliance
- The company must develop and implement robust Anti-Money Laundering (AML) and Know Your Customer (KYC) policies.
- An AML officer must be appointed to oversee compliance with these policies.
- Regular training for staff on AML and CTF procedures is required.
5. Business Plan
- A detailed business plan outlining the company’s operations, target market, and financial projections must be submitted.
- The business plan should include a risk assessment and measures to mitigate those risks.
Application Process
Application Process
1. Document Preparation
Gather all necessary documentation, including the business plan, proof of capital, AML/KYC policies, and personal information of key personnel.
2. Submission
Submit the application and all required documents to the Estonian FIU. The application can be submitted electronically.
3. Review and Approval
The FIU reviews the application, which typically takes around 60 days. They may request additional information or clarification. If the application meets all requirements, the FIU grants the license.
Post-Licensing Compliance
Post-Licensing Compliance
1. Reporting Requirements
Licensed companies must submit regular reports to the FIU, detailing their activities and compliance with AML and CTF regulations. Any suspicious transactions must be reported immediately.
2. Audits and Inspections
The FIU may conduct periodic audits and inspections to ensure ongoing compliance. Companies must maintain comprehensive records of all transactions and customer interactions.
3. Ongoing Compliance
- Companies must continuously adhere to AML and KYC policies.
- Any changes in company structure, operations, or key personnel must be reported to the FIU.
- Regular training and updates on regulatory changes for staff are mandatory.
4. Data Protection
Compliance with the General Data Protection Regulation (GDPR) is required, ensuring the protection of customer data.
Stricter Regulations as of 2024
In response to evolving risks in the cryptocurrency sector, Estonia has implemented stricter regulations. These include enhanced due diligence for high-risk customers, more detailed reporting requirements, and higher scrutiny during the application process.
Companies must ensure their AML and KYC policies are robust and continuously updated to reflect current risks and regulatory changes.
Advantages of Complying with Regulations
- Reputation: Operating under a stringent regulatory framework enhances the company’s reputation and trustworthiness.
- Market Access: Licensed companies can operate across the European Union, benefiting from the single market.
- Security: Robust regulations protect companies and their customers from fraud and financial crimes.
Types of crypto licensing in Estonia
In Estonia, the regulation of cryptocurrency businesses is well-defined and structured. As of 2024, there are two distinct types of licenses available for Virtual Asset Service Providers (VASPs):
| License type | Description of license |
|---|---|
| Cryptocurrency Exchange Services License | This license allows companies to offer services that involve exchanging virtual currencies for fiat currencies, or exchanging one virtual currency for another. Key points include: Scope of Services
|
| Crypto Wallet Custodial Services License | With this crypto licensed companies in Estonia can provide services related to keeping, storing and transferring crypto currencies. This involves generating and storing cryptographic keys used for customers to manage and store their virtual currencies. Key points include: Scope of Services
|
General Requirements for Both Licenses
Both types of licenses share several common requirements to ensure regulatory compliance and operational integrity:
Company Establishment
- The entity must be registered with the Estonian Commercial Register.
- The company must have a physical office in Estonia.
Management and Personnel
- Key personnel, including board members and the AML officer, must have a clean criminal record and a good reputation.
- The management team must demonstrate the necessary expertise and experience to run a cryptocurrency business.
AML and KYC Compliance
- Development and implementation of comprehensive AML and KYC policies.
- Regular training for staff on AML and CTF (Counter-Terrorism Financing) procedures.
- Regular audits to ensure ongoing compliance with AML regulations.
Business Plan
A detailed business plan must be submitted with the application, outlining the company’s operations, target market, and financial projections.
Financial and Operational Integrity
- Sufficient financial resources to support business operations.
- Clear operational procedures and risk management strategies.
Overview of requirements to obtain crypto license in Estonia
- Registered share capital of minimum 100,000 EUR for exchange services and 250,000 EUR for Crypto wallet custodial services
- It is required to have local physical office
- Personal requirements: Local employees – Local Director, AML Officer, Compliance Officer, Internal Auditor, External Auditor. (All employees will need to pass the interview with FIU which will be held in Estonian)
- Board members impeccable reputation and non-criminal record is necessary
- Documentation has to be submitted in Estonian language (translated and notarised)
- Implemented AML/KYC/CFT policies
- Detailed business plan with 3 year financial forecast.
Estimated time frames
Business name verification
1 day
Company registration
1-2 weeks
Documents and application preparation
3-4 weeks
Deposit and register share capital
1 week
Crypto license obtainment from FIU
9-12 weeks*
* The timeline also depends on the workload of FIU and any clarifications and queries that FIU may request in relation to the application for VASP license in Estonia.
Legal services for obtaining Crypto license in Estonia
Basic Package
19900EUR initial set up
- Legal Support throughout the entire project
- OÜ Company registration
- Legal Address for 1 year
- Due-diligence for shareholder and key members
- Assistance with share capital contribution and registration of it via notary
- Registration as licensed VASP (crypto) provider
- Corporate documents
- AML/KYC Policy
- Communication with regulator authorities
- Assistance with employment of AML officer, Compliance officer and Internal Auditor
- Assistance with search and lease contract for an office
This comprehensive package is designed to meet the minimum regulatory requirements, providing you with essential services and support for a successful venture for obtaining crypto license in Estonia.
Additional services on request
- Accounting services
- Additional corporate account
- Bank account for keeping client’s funds (safeguard)
- Apostilled corporate documents
- Business plan
- AML/CFT Training material
- Legal framework for launching Your Token
Ready-Made solution
available on request
- Registered company
- Legal address for 1 year
- No debts, no liabilities – clean company
- Active license
- Corporate documents
- Assistance with transfer of ownership
Eriks Fijalovs
Head of Blockchain and Crypto
Detailed Requirements for Crypto licensing in Estonia
To obtain a crypto license in Estonia, businesses must meet specific legal, financial, and operational requirements. Here’s an in-depth look at these requirements, including necessary documents and other key elements:
List of required documents
- Power Of Attorney: A power of attorney is a public document authorized by a notary that allows a company or individual to act on behalf of another entity to incorporate a company and obtain a crypto license in Estonia.
- This document is necessary if the application process or business operations are being handled by a third party on behalf of the company.
- AML/KYC/CFT Policy: Anti-Money Laundering (AML), Know Your Customer (KYC), and Countering the Financing of Terrorism (CFT) policies. These policies outline the procedures for verifying clients’ identities, assessing the potential for illegal activities, and identifying, preventing, and reporting suspicious activities.
- Purpose: Ensures compliance with Estonian and EU regulations on financial crime prevention.
- Business Plan with 3-Year Financial Forecast: A business plan is a detailed document that includes the company’s strategic objectives, market analysis, operational plans, and financial projections for the next three years. The business plan should include projected income statements, cash flow statements, and balance sheets.
- The purpose of the business plan is to demonstrate the financial viability and growth potential of the company to the Estonian Financial Intelligence Unit (FIU).
- Application Form: This is a comprehensive form to be submitted to the Estonian FIU. It contains details about the nature of the business, primary and secondary activities, and descriptions of how and where the activities will be conducted.
- Purpose: Provides the FIU with necessary information to assess the application.
- Memorandum and Articles of Association (MAA): These are legal documents prepared during company incorporation.
- Content: Represents the charter of the company, outlining its objectives, regulations, and operational framework.
- Purpose: Establishes the legal foundation and governance structure of the company.
Business premises requirements
- The company must have a physical office in Estonia. This office will be the base for the company’s day-to-day operations and ensure a local presence in compliance with Estonian regulations.
Share Capital and Government Fees
- Minimum Share Capital
- For Exchange Services: €100,000 for activities involving the exchange of virtual currency for fiat, fiat for virtual currency, or exchanging one cryptocurrency for another.
- For Custodial Services or ICOs: €250,000 for services involving crypto custodial services, the issuance of ICOs, or other virtual tokens.
- Purpose: Ensures that the company has sufficient financial resources to support its operations.
- Government Fees: The government processing, application, and registration fees for obtaining crypto license in Estonia equals to 10,000 EUR.
Personnel Requirements
- Director
- Description: A local director with relevant experience and education in the financial field.
- Role: Oversees the company’s operations and ensures regulatory compliance.
- Purpose: Provides local leadership and expertise.
- AML Officer
- Description: A local AML Officer with a certificate and experienced background in the cryptocurrency field.
- Role: Manages the company’s AML and KYC procedures.
- Purpose: Ensures compliance with AML regulations.
- Compliance Officer
- Description: A local Compliance Officer with proven experience and qualifications in regulatory compliance within the financial sector.
- Role: Ensures that the company adheres to legal standards and regulatory requirements.
- Purpose: Maintains the integrity and compliance of the company’s operations.
- Internal Auditor
- Description: A local trained professional providing independent and objective evaluation of the company’s financial and business operations.
- Role: Conducts internal audits to ensure financial accuracy and operational efficiency.
- Purpose: Helps in maintaining robust internal controls and compliance.
- External auditor
- Description: A signed agreement with a competent audit company based and licensed in Estonia, with expertise in blockchain technology, cybersecurity, and financial auditing.
- Role: Provides external audit services.
- Purpose: Ensures transparency and compliance through independent audits.
Roadmap of obtaining crypto exchange license in Estonia
In order to obtain an crypto license in Estonia, a virtual currency service provider must comply with the conditions of the control object specified in § 72 subsection 1 points 1-5 subsection 2 of RahaPTS and § 72(1) – 72(5) of RahaPTS (Section 72 subsection 1 p 7 of RahaPTS).
For more detailed road map of the project and commercial offer – get in touch with our crypto professional.
Eriks Fijalovs
Head of Blockchain and Crypto
Gathering documentation
The process begins with collecting the necessary documentation, including a passport and proof of address. The client provides three preferred company names, which are then verified and reserved with the Center of Registers. A business model description is prepared, and a Power of Attorney (PoA) is sent for notarisation and legalisation.
OÜ company registration as Virtual Asset Service Provider and share capital contribution
OÜ company is formed either remotely or with physical presence. This includes opening an operational bank account and contributing a minimum share capital of 100,000 EUR. The process is confirmed by a notary, and the company’s business activity is registered as a Virtual Asset Service Provider. Necessary documents are provided by the Commercial Register (Äriregister), translated from Estonian to English, notarised, and apostilled.
Internal policies and HR services
Compliance is addressed through due-diligence measures, principles of verification, and data collection. Individual AML/KYC/CFT policies are prepared. Support is provided for finding a physical office with a lease agreement and local employees (director, AML officer, compliance officer, internal auditor, external auditor). Professionals are prepared for interviews with the Financial Intelligence Unit (RAB), and successful interviews are confirmed. Local employees are registered with the Tax Office (Maksu- ja Tolliamet).
Application Submission
Application forms are filled out and submitted to the Financial Intelligence Unit (RAB). All requirements are reviewed and confirmed before submitting the application to obtain the crypto license in Estonia.
Crypto Friendly Corporate account opening
Based on an analysis of the company’s business activity, suitable crypto-friendly bank options are presented. Necessary documentation from both the customer and the company is collected, and additional documents are prepared if required by the bank (Legal Opinion, Terms and Conditions). The application is sent to the chosen banks, and the account opening process is guided and assisted throughout.
Operational Launch
Operations commence within the Estonian regulatory framework. Ongoing support is provided in accounting services, drafting agreements (B2B, B2C, terms and conditions), preparing policies, opening additional bank accounts, offering legal opinions and support, HR services, tax consulting, notarisation/apostille of documents, and ensuring compliance monitoring and regulatory reporting to adhere to FIU guidelines.
Detailed Time Frames to Obtain a Crypto License in Estonia
The estimated time frame to obtain a crypto license in Estonia involves several stages, each with its own duration. Here is a detailed breakdown of the process and the associated time frames:
1. Company Formation and Preparation of Documents
Time Frame: 4-5 Weeks
- Company Registration: Registering the company with the Estonian Commercial Register can typically be completed within a few days to a week, provided all necessary documentation is in order.
- Preparation of Documents: Preparing the required documents for the license application, such as the business plan, AML/KYC policies, proof of capital, and personal information of key personnel, can take about 3-4 weeks.
2. Submission of Application to the FIU
Time Frame: Immediate to 1 Week
Once all documents are prepared, submitting the application to the Estonian Financial Intelligence Unit (FIU) can be done immediately. The submission process itself is straightforward and typically takes less than a week.
3. Review and Processing by the FIU
Time Frame: 60 days
Initial Review:
The FIU will conduct an initial review of the application to ensure all required documents are submitted. If any documents are missing or additional information is needed, the FIU will request it, which can add a few days to the process.
Detailed Review:
The FIU then undertakes a detailed review of the application. The official review period is up to 60 days. During this time, the FIU assesses the company’s business plan, AML/KYC policies, and the backgrounds of key personnel.
4. Additional Information and Clarifications
Time Frame: Varies
If the FIU requires further information or clarification, the time needed to gather and submit this information can vary. This might extend the process by a few additional weeks, depending on the complexity and responsiveness of the applicant.
5. Final Decision and Issuance of License
Time Frame: Up to 2 weeks
Once the FIU completes its review and is satisfied with the application, the final decision is made. If approved, the license is issued within a couple of weeks.
The applicant is notified of the decision, and the license is officially granted. This notification process is usually swift, taking just a few days.
Total Estimated Time Frame
If all documents are in order and there are no requests for additional information, the total time frame from company formation to receiving the license can be as short as 3-4 months.
Average Time Frame:
Taking into account possible delays in preparing documents, responding to FIU requests, and the full 60-day review period, the average time frame is typically around 4-6 months.
In summary, the process to obtain a crypto license in Estonia involves several stages, each with its own timeline. On average, businesses can expect the entire process to take between 4 to 6 months, assuming all requirements are met promptly and there are no significant delays.
If you find the whole process complex, you can always enlist the services of professionals such as ourselves at Legalaes. Legalaes provides professional assistance and support throughout the process of obtaining a cryptocurrency license in Estonia. Our comprehensive service ensures a guaranteed turnkey solution, aligning with Estonia’s reputation as a premier destination for cryptocurrency ventures.
Advantages of the VASP license in Estonia
Obtaining a Virtual Asset Service Provider (VASP) license in Estonia offers numerous advantages for cryptocurrency businesses. These advantages span regulatory, operational, and strategic aspects, making Estonia an attractive destination for crypto firms. Here are some key benefits:
01
Regulatory Clarity and Compliance
Estonia has established clear and comprehensive regulations for VASPs, providing legal certainty and stability for businesses. The regulatory framework aligns with the European Union’s directives, ensuring compliance with international standards.
Consequently, adhering to stringent AML and KYC requirements helps build trust with customers and partners. Robust AML/KYC frameworks help prevent financial crimes, enhancing the overall security of operations.
02
Favorable Tax Environment
Estonia taxes corporate profits only when they are distributed, allowing companies to reinvest profits without immediate tax liabilities. This system encourages growth and development by enabling businesses to reinvest their earnings back into the company.
Additionally, a flat personal income tax rate of 20% is favorable for employees and executives, making Estonia an attractive place to live and work.
03
Pioneer in Crypto Licensing
As the first country in the world to issue a crypto license, Estonia has a well-established and robust licensing framework with a high number of issued licenses.
04
Strategic Location and EU Market Access
A VASP license in Estonia provides access to the entire European Union market, allowing businesses to operate across EU member states. The EU’s single market facilitates easier cross-border transactions and business expansions.
Estonia’s geographic location offers proximity to key financial centers in Europe, enhancing business connectivity and opportunities.
05
Business-Friendly Environment
Estonia is known for its efficient bureaucracy and ease of setting up and operating a business. The digital infrastructure, including e-Residency, simplifies administrative processes and reduces bureaucratic hurdles.
Estonia is a leader in digital innovation and technology adoption, fostering a supportive environment for tech-driven businesses like those in the cryptocurrency sector.
06
Skilled Workforce and Talent Pool
Estonia has a well-educated and skilled workforce, particularly in technology and finance sectors. The local talent pool is experienced in digital and blockchain technologies, which are crucial for crypto businesses.
Estonia’s immigration policies are favorable for attracting international talent, making it easier for businesses to hire skilled professionals from around the world.
07
Strong Cybersecurity Infrastructure
Estonia is renowned for its robust cybersecurity infrastructure, which is critical for protecting sensitive financial data and digital assets. The government’s commitment to cybersecurity ensures a secure operating environment for VASPs.
08
Supportive Regulatory Environment
Estonian regulatory authorities are known for being proactive and collaborative, providing guidance and support to businesses. The Estonian Financial Intelligence Unit (FIU) works closely with VASPs to ensure compliance and address regulatory challenges.
Estonian regulators are open to innovation and adaptive to new technological advancements, helping VASPs stay at the forefront of the industry.
09
Reputation and Trust
A VASP license from Estonia, a well-regarded jurisdiction in the crypto industry, enhances the credibility and trustworthiness of a business. Operating under a reputable regulatory framework builds confidence among customers, investors, and partners.
Links for legislation related to Crypto license in Estonia
Serves as Estonia’s central unit for analyzing financial transactions to prevent money laundering and terrorist financing, providing oversight and investigative support.
II. Money Laundering
Involves the process of concealing the origins of illegally obtained money, typically by means of transfers involving foreign banks or legitimate businesses.
Establishes the legal framework in Estonia for the prevention, detection, and reporting of money laundering and terrorist financing activities, requiring due diligence from businesses to combat these crimes.
Governs the registration, management, and disclosure requirements of commercial entities in Estonia, ensuring transparency and reliability in business practices.
Outlines Estonia’s approach to implementing international sanctions, including measures against money laundering and terrorist financing, to comply with global standards and obligations.
Serves as Estonia’s authority responsible for tax collection, customs enforcement, and facilitating legitimate trade, ensuring compliance with tax laws and border regulations. This agency plays a crucial role in maintaining the integrity of Estonia’s financial system by enforcing tax and customs laws.
Taxation of Cryptocurrency Companies in Estonia
Estonia continues to offer a favorable tax regime for cryptocurrency companies, contributing to its reputation as a leading destination for crypto businesses. Here’s a detailed overview of the taxation landscape for cryptocurrency companies in Estonia:
Corporate Income Tax
Corporate Income Tax
1. Reinvestment-Friendly System
- Estonia operates a unique corporate tax system where profits are only taxed when distributed. Retained or reinvested profits are not subject to corporate income tax.
- Distributed profits, including dividends, are taxed at a flat rate of 20%.
2. Calculation of Taxable Income
- The taxable income includes distributed dividends, fringe benefits, gifts, donations, and non-business expenses.
- Crypto companies are taxed similarly to other businesses, with their income from operations, such as trading, exchanges, and services, being treated like regular business income.
VAT (Value Added Tax)
VAT (Value Added Tax)
Cryptocurrency transactions are generally exempt from VAT. This includes the exchange of cryptocurrencies and other financial services related to virtual currencies. However, companies must pay VAT on the purchase of goods and services needed for their operations unless exempt.
Employment Taxes
Employment Taxes
- Social Tax: Employers must pay a social tax of 33% on gross salaries to cover social security and health insurance for their employees.
- Income Tax: Personal income tax on employee salaries is withheld by the employer at a flat rate of 20%.
- Unemployment Insurance: Employers contribute 0.8% and employees contribute 1.6% of the gross salary for unemployment insurance.
Reporting and Compliance
Reporting and Compliance
1. Accounting Standards
Crypto companies must maintain accurate and up-to-date accounting records in compliance with Estonian accounting standards. Financial statements must be prepared annually and submitted to the Estonian Tax and Customs Board (ETCB).
2. Tax Declarations
Companies must file monthly VAT returns if they are registered for VAT. Annual corporate income tax returns must be filed, detailing any distributed profits and other taxable items.
3. Cryptocurrency Specific Reporting
Crypto companies must report their cryptocurrency holdings and transactions accurately, as these will be scrutinized during audits.
Capital Gains Tax
Capital Gains Tax
Tax on Crypto Gains: For individuals, capital gains from cryptocurrency transactions are subject to a 20% income tax. For companies, gains from cryptocurrency transactions are treated as business income and taxed when profits are distributed.
Cross-Border Considerations
Cross-Border Considerations
1. Double Taxation Agreements (DTAs):
Estonia has an extensive network of DTAs with numerous countries, which helps mitigate the risk of double taxation for international crypto businesses and investors.
2. Transfer Pricing
Crypto companies engaging in transactions with related entities abroad must comply with Estonia’s transfer pricing regulations to ensure that transactions are conducted at arm’s length.
Recent Developments and Future Outlook
Recent Developments and Future Outlook
- Regulatory Tightening: Estonia has been strengthening its regulatory framework for crypto businesses, which includes more stringent compliance and reporting requirements. This trend is likely to continue to ensure the integrity of the financial system.
- Tax Compliance: Increased focus on tax compliance and transparency for crypto transactions is expected, with authorities leveraging advanced technologies to monitor and enforce tax obligations effectively.
FAQ about Crypto license in Estonia
1. What kind of cryptocurrency licenses is in Estonia?
There are 2 types of cryptocurrency licenses in Estonia:
1) Cryptocurrency exchange
Ability to exchange virtual currency into fiat and other way around, and exchange from one cryptocurrency to another crypto currency
2) Crypto wallet custodial services
Cryptocurrency storage in wallets, private and encrypted keys.
2. How to get a crypto license in Estonia?
Establish OÜ company in Estonia, due-diligence and non-criminal record check of managing board, prepare AML/KYC/CFT policies, deposit and register share capital, appoint and register required local employees and business premises, submit business description, business plan and financial forecast, internal and external strategies for implementation regarding regulations of cryptocurrencies, complete and submit application to FIU.
3. How long to obtain cryptocurrency license in Estonia?
Process involves several multifunctional steps and communication with regulator, in overall our experience have showed average time of 6 months.
4. Can a foreigner get a cryptocurrency license in Estonia?
Yes, however by regulations, acting director must be local Estonian resident.
5. What is share capital for crypto license in Estonia?
Depending on company crypto activities and services, but the minimum is 100,000 EUR
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