An alternative investment fund is a legal entity or a pool of assets that includes the capital of several investors for the purpose of investing it in accordance with a specific investment policy of the fund in the interests of the respective investors and their common interests.
Cryptocurrency funds are investment funds that invest their money entirely in cryptocurrencies or combine it with investments in other assets. Their goal is to maximize profits by managing their depositors’ coins or investing their funds in crypto-projects and primary coin supply.
A cryptocurrency investment fund consists of two legal entities:
Fund Manager – OÜ
The Fund Manager is a company which main and permanent activity is the management of one or more funds. The Fund Manager can manage a fund created or established in accordance with the Investment Funds Act. In order to work as a Fund Manager, a person must be licensed to operate and register their activities with the Money Laundering Data Unit (FIU) with the provisions of Part 5 of the Investment Funds Act.
It is required to obtain a license to operate as a fund manager in a management company. Fund managers who want to manage euro funds and large-scale alternative investment funds also need to obtain a license.
In the case of a small fund, a fund manager should apply for an operating licence as a small fund manager or register its activities with the Estonian Financial Supervision Authority (EFSA). This kind of managers can only manage non-public investment funds, meaning their business is primarily aimed at professional investors.
If a management company of a small unlicensed fund does not wish to apply for a licence as a small fund manager, they have to register its activities with EFSA. EFSA’s supervision over registered unlicensed small fund managers is limited to the registration process and later data collection.
Limited Partnership Fund (LPF)
Participants of the Limited Partnership Fund are at least one full member (General Partner), which is the Fund Manager, and at least one investor (Limited Partner).
A Limited Partnership Fund is a foundation established as a Limited Partnership in accordance with the Investment Funds Act, and the provisions of the Commercial Code of the Republic of Estonia apply to its establishment, operation, and liquidation.
The Limited Partnership Fund can manage its property or enter into a Management Agreement with the Fund Manager. Only a Fund Manager who is licensed to operate under the Investment Funds Act can act as a Limited Manager of a Limited Partnership Fund or a General Partner of a Limited Partnership Fund that manages its own assets.
Registration process
There are no difficulties when creating a company that will serve as the legal framework for a cryptocurrency startup in Estonia. The registration process is similar to other company.
- Registration of the alternative fund management company, the fund manager (AIFM). You can easily do it using your e-Resident card, or by the power of attorneys, or by a visit to Estonia
- Registration of the fund’s management company with the Estonian Financial Supervisory Authority (EFSA)
- The license from the Financial Intelligence Unit (FIU), which usually takes up to 60 days
- Registration of the fund. Once you succeeded with the first step, this process takes up to 5 days.
Crypto-licence
New amendments to the Money Laundering and Terrorist Financing Prevention Act that entered into force on March 10, 2020 make it possible to apply for a single cryptocurrency license and provide services for both storage and exchange of cryptocurrency.
The state fee for submitting an application is 3,300 EUR. Application must include the contact details of every referred individual as well as the address of the future website/platform.
The issuance of a cryptocurrency exchange license is possible only when future company comply with the following conditions:
- Registration on the territory of Estonia
- Location of the Board and place of business must be in Estonia
- Company’s minimum share capital must be not less than 12,000 EUR
- Active bank account in a financial institution registered in Estonia
- KYC/AML officers required to undergo an interview with the FIU
No sooner than all requirements are satisfied, a cryptocurrency license will be issued for a timeless period within 60 working days.
LKS Consult OÜ provides assistance in registering alternative investment funds in Estonia. We accompany and assist our clients in managing investment and financial structures starting from idea discussion and until the project’s launch.
A team of experts from LKS Consult OÜ will accompany your project through all the necessary procedures in the preparation of documents and obtaining the legal permission from the authorities to launch your crypto-business. Our team will be pleased to advise on tax-related issues in Estonia and provide accounting services.