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):

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

  1. Reputation: Operating under a stringent regulatory framework enhances the company’s reputation and trustworthiness.
  2. Market Access: Licensed companies can operate across the European Union, benefiting from the single market.
  3. 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 typeDescription of license
Cryptocurrency Exchange Services LicenseThis 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
  • Exchange between virtual currencies and fiat currencies.
  • Exchange between different virtual currencies.
Requirements
  • A company must be registered in Estonia.
  • A minimum share capital of 100,000 EUR.
  • At least one board member must be a resident of Estonia.
  • Implementation of robust AML (Anti-Money Laundering) and KYC (Know Your Customer) procedures.
  • Appointment of an AML officer.
Crypto Wallet Custodial Services LicenseWith 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
  • Custody and management of virtual currency wallets.
  • Safekeeping of customers’ cryptographic keys.
Requirements
  • A company must be registered in Estonia.
  • A minimum share capital of 250,000 EUR.
  • At least one board member must be a resident of Estonia.
  • Implementation of robust AML and KYC procedures.
  • Appointment of an AML officer.

General Requirements for Both Licenses

Both types of licenses share several common requirements to ensure regulatory compliance and operational integrity:

Company Establishment

Management and Personnel

AML and KYC Compliance

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

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

1

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.

2

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.

3

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).

4

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.

5

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.

6

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

2.  Submission of Application to the FIU

Time Time: 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 Time: 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:

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.

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.

Estonia crypto license regulatory body

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

<< 1 >>


Crypto license in Czech Republic 2024

Business activity: Crypto Exchange, P2P
Time frames: 1-2 months

Crypto license in Lithuania 2024

Business activity: Crypto Exchange, P2P, ICO
Time frames: 3-4 months

Crypto license in Estonia 2024

Business activity: Crypto Exchange, P2P, ICO
Time frames: 5-6 months

Crypto license in Poland 2024

Business activity: Crypto Exchange, P2P, ICO

Crypto license in Slovakia 2024

Business activity: Crypto Exchange, P2P
Time frames: 1-2 months