Cryptocurrency License in Estonia
Company in Estonia OÜ will be happy to offer assistance in getting a cryptocurrency license in Estonia.
On the 15th of March 2022 amendments to the Estonian law Money Laundering and Terrorist Financing Prevention Act (Money laundering prevention and implementation of financial sanctions guidelines and legislation in Estonia and in European Union | FSA), which regulates cryptocurrency services offered by Estonian companies, came into force. The purpose of these amendments is to more effectively reduce the risks of money laundering and terrorist financing that arise during cryptocurrency transactions within Estonian companies. Since additional requirements for virtual asset service providers (VASPs) are being introduced to achieve this goal, already licensed VASPs, as well as new applicants, must bring their activities and documentation in line with the amendments as of 15.06.2022.
Cost of cryptocurrency license
Specialists of Company in Estonia OÜ will be glad to assist you in getting a cryptocurrency license. The assistance includes making the list of necessary documents, help in developing procedural rules of the company, translation of documents into Estonian and support throughout the licensing process.
“Company & Crypto-License in Estonia” package includes
** An obligatory condition for obtaining a cryptocurrency license in Estonia is the agreement with an auditor. This process is handled directly by the local/Estonian director of the company, as the auditor will need to provide internal financial documents of the company.
Single cryptocurrency license requirements in Estonia
The IT jurisdiction of Estonia is considered as the mildest of its kind with facilitated conditions for obtaining a cryptocurrency exchange license for start-ups in the blockchain technology industry. In other words, a so-called crypto-license is an official permission to conduct a regulated cryptocurrency business. Several new cryptocurrency and trading platforms are created every week, and a significant part of them had been licensed in Estonia, since the local order presupposes a quicker process of obtaining a crypto-license than, for example, in the jurisdictions of other countries. A team of experts from Company in Estonia 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.
The National Financial Intelligence Unit (FIU, or Rahapesu Andmebüroo, RAB) is the local government institution responsible for granting a crypto-license in Estonia. For activities in the field of crypto services, in accordance with the Law on the Prevention of Money Laundering and the Financing of Terrorism, is required a license called a single cryptocurrency license. Two different services fall into this category: a virtual currency wallet service provider and a virtual currency exchanger (see I and II). Previously, they required two different licenses, which are now merged into the Virtual Currency Service Provider License.
- Crypto-wallets and custodian services
- The first category of services includes the generation and storage of encrypted customer keys.
- The second category of services is the cryptocurrency exchange for fiat money or vice versa, or cryptocurrency for another cryptocurrency.
Benefits of obtaining a crypto-license in Estonia
Hundreds of crypto-companies conduct their business from Estonia for a number of the following reasons that are undeniably profitable for doing business across Europe.
First, an Estonian crypto-company can benefit from fair and accurate regulation. The Estonian AML Act and related provisions establish rules that give the licensed company the ability to know what is permitted, what is prohibited, and in general how they must act to comply and remain in compliance with the law.
In addition, Estonia provides a favorable business environment. Almost all aspects of establishing and running an Estonian company are carried out completely online from anywhere in the world thanks to the e-Residency programme. According to the recent data it became clear that Estonian e-Residents from all over the world generate over 1 billion euros of economic activity through their Estonian companies.
In addition, there is no corporate tax in Estonia. Instead, only distributed profits are usually subject to 20% corporate income tax of 20/80 of the net profit distribution. In other words, under the Estonian taxation scheme, a company benefits from the opportunity to reinvest its profits tax-free.
Cryptocurrency wallet services
Cryptocurrency wallets are digital offline and online tools based on public-key cryptography used to securely send and receive cryptocurrency over the network.
There are two types of wallets: cold (offline wallets – such as hardware wallets, paper wallets for cryptocurrency) and hot (online wallets) storage. The difference is that cold wallets store digital coins offline, without Internet access; while hot wallets are mainly used to store small amounts or store on a daily basis. Hot storage wallets include conventional and multicurrency wallets for cryptocurrency.
A single cryptocurrency license in Estonia allows to provide cryptocurrency wallet services for both cold and hot storage.
Services of exchanging a virtual currency for a virtual or FIAT currency
With Estonian cryptocurrency license, your company can provide crypto/FIAT exchange services on a par with the market leaders:
A single cryptocurrency license in Estonia allows to exchange cryptocurrency for FIAT and cryptocurrency for cryptocurrency.
7 steps to obtain the crypto license in Estonia
Filing a cryptocurrency license application
The application for crypto licence shall be filed by a Board member of the Estonian company.
The licence application can be submitted electronically using an е-residency card, when you visit a notary in Tallinn or issue a power of attorney to a representative of the Company in Estonia OÜ, so that we can submit the application for you. The state fee for filing an application for the single cryptocurrency licence is 10,000 EUR.
The fee shall be paid to the Estonian Ministry of Finance. The decision on issuing the licence shall be made by the Anti-Money Laundering Data Office (an independent entity of the Police and Border Guard Department) within 60 business days after the date of application.
The licence is open-ended.
Obtaining a single cryptocurrency license requires the following data:
- Contact details of the business owner (phone number, e-mail and mailing address), a CV.
- Address of the provision of services and web page address.
- Name and contact details of the person responsible for the offer.
- Name, personal code (if not available – date of birth), place of birth and residence address of the real beneficiary of the company.
- Procedural rules and internal control regulations developed according to Articles 29 and 30 of the Money Laundering and Terrorist Financing Prevention Act, and in case of persons with special responsibilities specified in Article 6 of the International Sanctions Act, procedural rules developed according to Section 6 of the International Sanctions Act, and the procedure for verifying their implementation.
- Name, personal code (if not available – date of birth), place of birth, citizenship, residence address, position and contact details of the contact person specified in Part 3, Article 29 or Part 4, Article 29 of the Money Laundering and Terrorist Financing Prevention Act.
- Name, personal code (if not available – date of birth), place of birth, citizenship, residence address, position and contact details of the person responsible for applying international financial sanctions, as determined by the business owner according to Part 9, Article 13.
- If the business owner, the Board member, the procurator, the real beneficiary or the proprietor is a citizen of a foreign country or if the business owner is a foreign person offering services, it is necessary to submit a statement from the penalty register in one’s country of origin or an equivalent document issued by a judicial or administrative authority confirming the absence of penalties for crimes committed against government authorities, money laundering crimes or another deliberate crimes no earlier than three months ago and certified by a notary or in another similar way and legalised or approved by the certificate replacing legalisation (Apostille), unless otherwise provided by an international treaty.
New regulations for crypto-companies in Estonia
In accordance with the Money Laundering and Terrorist Financing Prevention Act, amendments have been made to establish stricter boundaries for companies applying for an Estonian crypto-license.
1) Equity of a virtual currency service provider.
The authorized capital of the virtual currency service provider should be:
- at least EUR 100,000 if the virtual currency service provider provides a virtual currency exchange service (a service in which a person exchanges virtual currency for money or money for virtual currency or one virtual currency for another)
- at least 250,000 euros if the virtual currency service provider provides a virtual currency translation service (a service that allows you to make a transaction at least partially electronically through a virtual currency provider on behalf of the initiator in order to transfer the virtual currency to a virtual currency wallet or recipient account)
When establishing a company for a virtual currency service provider, the payment of the authorized capital of the company can only be money.
2) Prerequisites for the identification and verification of customer data.
The service provider must use high-security technology in identifying and verifying identity through information technology; which provides the true identity and prevents the alteration or misuse of the transmitted data.
In the identification and verification of identity by means of information technology, the natural person referred to in paragraphs 1 and 2 of Article 31 of the Law on the Prevention of Money Laundering and Financing of Terrorism or the legal representative of the legal entity shall use a document digital
Identification or other electronic identification system with a high level of reliability issued under the Act on Identity Cards is included in the list published in the Official Journal of the European Union in accordance with Article 9 of the Regulation (EC) No 910/2014 of the European Parliament and the Council on Trusts Services Required for Electronic Identification and Electronic Transactions, repealing Directive 1999/93/EC (OJ L 257, 28.08.2014, pp. 73-114)and an information technology tool with a functioning camera, microphone and hardware and software, In identifying and verifying identity, the service provider may use an information technology tool to compare biometric data.
When performing an exchange and transfer transaction, the virtual currency service provider of the originator of the transaction shall establish the identity of each customer in accordance with the provisions of articles 21 and 22 of this Law and shall collect at least the following information concerning the originator of the transaction:
- In the case of a natural person, name, unique transaction identifier, payment account or virtual currency wallet identifier, name and number of identity document, as well as personal identification code or date of birth, place of birth and address of residence;
- When performing a transaction for exchange and transfer of virtual currency, the virtual currency service provider collects unique identification data of the transaction about the recipient of virtual currency or transfer, as well as data of the payment account identifier or virtual currency wallet, if payment account data or virtual currency wallet identifier is used for the transaction.
3) The business plan of the virtual currency provider is submitted for at least two years.
4) Requirements for the virtual currency provider’s own funds.
The Virtual Currency Provider’s own funds should correspond to one of the following sizes at any given time, whichever is larger:
- Size of the authorised capital
- The amount of own funds calculated according to the calculation method:
If the virtual currency service provider provides the service specified in paragraphs 101 or 102 of part 3 of this Law, the provider’s own funds of the virtual currency service provider shall be at least equal to the sum of the following parts of the volume:
- 4 per cent of the part of transactions made in the provision of the service that is up to or equal to 5 million euros;
- 2.5 per cent of the share of transactions made in the provision of the service, which is more than EUR 5 million but does not exceed EUR 10 million;
- 1 per cent of the share of transactions executed in the provision of the service, which is more than EUR 10 million, but does not exceed 100 million euros;
- 0.5 per cent of the share of transactions carried out in the provision of the service, which is more than 100 million euros, but does not exceed 250 million euros;
- 0.25 per cent of the share of transactions made in the provision of the service, which is over 250 million euros.
The share of transactions performed as a service specified in Part 6 of this Article shall be calculated on the basis of one twelfth of the total amount of transactions performed as services specified in Parts 101 and 102 of Article 3 of this Law for the previous year. Venture service provider who worked less than 12 months in the previous year should split the amount of remittance and exchange transactions made in the previous year by the number of months in force in the previous year to arrive at the corresponding figure.
The virtual currency service provider is required to implement measures to ensure that its own funds can be calculated with sufficient accuracy at any time. The Financial Intelligence Unit may establish a period of time within which the virtual currency service provider must bring its own funds into compliance with the requirements established by this Law and the legal acts issued on its basis.
5) Audit of virtual currency provider.
Auditing of the virtual currency service provider’s annual reports is mandatory. The auditor’s data must be specified when applying for a license.
6) Requirements for location, location, board members and contact person of the virtual currency provider.
- The member of the board of the virtual currency service provider must have higher education and professional experience of at least two years.
- A member of the management board of a virtual currency service provider may not hold the position of a member of the management board of more than two virtual currency service providers.
7) State fee for application for cryptocurrency licence increased from EUR 3,300 to EUR 10,000.
Crypto license in Estonia 2023
New Requirements for Virtual Currency Service Providers
The amendments to the Money Laundering and Terrorist Financing Prevention Act (hereinafter the Act) that entered into force on 15 March 202 significantly increased the capital adequacy requirement for providers of virtual currency services, introduced the obligation to conduct an audit of the annual report and internal audit, and made a number of other changes.
Virtual currency providers that already held a valid activity license were given a deadline until 15 June 2022 to align their operations with the new requirements. This article discusses the most important amendments.
New types of virtual currency services
To the two existing types of virtual currency services – virtual currency wallet services and virtual currency exchange services – two new types of virtual currency services have been added:
- virtual currency transfer service and
- organization of an offer or sale in connection with the emission of a virtual currency.
These two activities are not yet regulated by law. Thus, under the new Act, providers of virtual currency services who were not previously required to hold an activity license are now required to analyse and clarify whether their activities fall under the two added types of virtual currency services.
In virtual currency transfer service, the service provider concludes on behalf of the transaction’s initiator (user) a transaction through which the virtual currency is transferred to the virtual wallet or to the recipient’s account. This includes services that allow the user to make transactions between their wallets or accounts. Such a service is also considered to be the case when several service providers are involved in the provision of the service at the same time and the transaction is carried out by each service provider separately or jointly with several service providers.
In the case of a service related to the issuance of a virtual currency, the service provider acts for or on behalf of the issuer and arranges for a public or directed offer or sale or provides a related financial service. An example of this service is the organization of an ICO (initial coin offering) and the provision of related services, if this is carried out for or on behalf of the issuer of the virtual currency.
Increase in the requirement for the statutory capital of the Estonian company
Capital adequacy requirements will increase significantly in the interest of greater reliability of service providers and better protection of creditors. The unit capital or share capital of the virtual currency service provider that previously was EUR 12,000 must now be at least EUR 100,000 if a wallet service, exchange service or a virtual currency-related public or targeted offer or sale is provided.
Since the role of the service provider in the case of a virtual currency translation service is similar to that of an electronic money institution, the capital adequacy requirement for such a service is the same as the EUR 250,000 requirement for an electronic money institution. In this case, the contribution to the unit or share capital of the provider of the virtual currency service can only be monetary.
Requirements for the own funds of the virtual currency service provider are also added as an innovation. The virtual currency provider’s own funds shall at all times correspond to one of the following, whichever is greater:
- the amount of the unit capital or share capital established in the Money Laundering and Terrorist Financing Prevention Act, or
- the amount of own funds calculated according to the calculation method established in Part 3 or Part 6 of Article 72² of the Act.
The virtual currency service provider’s own funds consist of Tier 1 fixed assets as set out in Articles 26 to 30 of Regulation (EU) No 575/2013 of the European Parliament and of the Council of the EU, together with the deductions provided for in Article 36, and the deductions are not subject to the exemptions related to the threshold set out in Articles 46 and 48 of the Regulation.
Obligation to audit the annual report and internal audit
According to the changes in the law, the audit of the annual report of the virtual currency service provider’s will become mandatory, and it must be carried out by an audit firm, which is appointed for no more than 5 years.
The audit firm verifies, as at the reporting date, that the virtual currency service provider has fulfilled the requirements set for its own funds and provides an opinion to the virtual currency service provider and the Financial Intelligence Unit by the due date of the submission of the report for the economic year of the service provider.
In the future, providers of virtual currency services should develop and implement adequate internal controls that cover all levels of management and operations. To this end, the supervisory board of the service provider or, in the absence of a supervisory board, the management board of the service provider appoints an internal auditor to carry out the tasks of the internal control department, who will verify the compliance of the activities of the service provider, its managers and employees with legal acts, regulations of the Financial Intelligence Unit, decisions of the governing bodies, internal regulations, contracts concluded by the service provider and good tradition.
If the internal auditor becomes aware of information that indicates a violation of the law or harm to the interests of clients, he/she must immediately transmit such information to the heads of the virtual currency service provider and the Financial Intelligence Unit.
More information about the initiator of the transaction
Further, when identifying, the service provider must request at least his phone number and e-mail address as the customer’s contact information. When performing a virtual currency exchange and transfer operation, a requirement similar to the so-called travel rule requirement is applied to payment services. According to this requirement, the following data should be collected about the virtual currency transfer initiator:
- unique transaction identifier
- ID code of the payment account or virtual currency wallet
- personal identification code, name and number of the identity document or date of birth, place of birth and address of residence.
In addition, the service provider must ensure that the data is stored in a way that responds to requests from the Financial Intelligence Unit or law enforcement authorities. Data and documents related to the client must be kept for five years after the end of the business relationship.
Requirements for members of the management board
A member of the management board of a virtual currency service provider may not be a member of the management board of more than two virtual currency service providers at the same time. However, in certain cases, exceptions are possible – if the positions of a board member are in the same concern or commercial partnerships in which the virtual currency service provider has a significant participation. In justified cases, the Financial Intelligence Unit may exceptionally authorize one additional board member position.
It also adds the requirement that a board member must have had at least two years of higher education and professional experience. Areas that should be considered professional include banking and finance, economics, law, accounting, auditing, public administration, financial regulation, information technology, among others. Experience can be gained in both the private and the public sector, and may consist, for example, in supervision or training, ”notes the explanatory note to the bill amending the Money Laundering and Terrorist Financing Prevention Act and other laws.
The new version of the Prevention of Money Laundering and Terrorism Financing Act also supplements the grounds for refusing to issue a licence to operate. An important innovation is that the Financial Intelligence Unit may refuse to issue a licence to operate if sufficient supervision of the applicant is prevented by a substantial link between the entrepreneur and another person, or if it is found that the entrepreneur does not intend to operate in Estonia, that his activities are not related to Estonia or that the origin of his share or share capital is questionable.
Preparation for auditing a virtual currency service provider
Since 2023, all undertakings licensed to provide virtual currency services will be subject to mandatory audit of their financial statements and the adequacy of their own funds.
In order for the company’s management and accountants to successfully complete the audit, it is necessary to prepare the software and to establish the methods for storing and presenting the data in advance, so that the auditor can gather sufficient relevant evidence during the audit, which in turn will give him the opportunity to express an opinion on the financial statements.
There are four specific areas of virtual currency accounting where auditors may have more questions than usual:
- confirmation of balances and transactions in virtual currency;
- confirmation of liabilities in virtual currencies;
- accounting and periodization of sales revenue;
- accounting for revaluation of the cost of virtual currencies.
If virtual currencies are stored on a third-party platform, it is relatively easy to confirm their existence, since some platforms (Kraken, Binance) allow to confirm the balances at the end of the year, on other platforms one can view the asset balance retrospectively or reach them through extracts from the transaction history, viewing the current state and returning from there to the state as of December 31. However, the auditor will require the platform administrator to formally sign off on the balances or, if this is not possible, the auditor must be present at the entrance to the platform and verify for himself the existence and accuracy of the balances.
If virtual currencies are stored on the undertaking’s computer, the situation is more complicated. The auditor will request for a list of all wallets (public wallet addresses) where virtual currencies were stored as of December 31.
The wallet balance can be checked using various websites of the blockchain explorer (for example, ethscan.io, which can be used to check the balances and transactions of various ERC20 – Ethereum virtual currency platform – wallets), and the wallet belonging to the entrepreneur using test records or signing using a wallet. It is also possible that the wallet allegedly used by the client as of 31 December was empty because the assets were in a different wallet. The reason may be, for example, that the client sent the assets to another wallet on December 31, the transaction was completed and reflected in the public data on the blockchain, but not in the client’s own system as of that date. Also, errors made by people who made a list of wallets may be the cause, if this is not an automatic statement from the client’s system.
It is also important to verify the recording of inventory values in the books using the year-end market price and comparing the value recorded in the books with the market price. If an undertaking has its own trading platform, it is more likely that it will store its customers’ virtual currencies on its platform. In such a case, the undertaking accounts for this liability in euros in the same way as inventories, and it is necessary to check whether the monetary value of the liabilities was correctly calculated using the market price as at 31 December.
Reaffirmation of obligations
The standard approach to confirming obligation is to reconcile them with third parties. A random sample of customers and the largest customers is made, and the undertaking conducts a procedure with them to confirm the balance under the control of the auditor. Undertakings are also often the largest customers, and the likelihood of receiving confirmation of the balance from them is higher than from an individual whose counterobligation is relatively small. If the number of customers is very large and it can be difficult to obtain confirmations, then automation of this process should be provided during the development of the platform. Kraken, for example, checks wallet balances, asks users of the platform for confirmation when logging in, and the data is passed to the auditors.
In addition to the balance confirmations, the entrepreneur must also provide the auditor with an opportunity to check the undertaking’s internal control system with respect to the obligations in order to gain an understanding of how the obligations have been accounted for and how the undertaking itself is satisfied that its accounting is correct.
Accounting and periodization of sales revenue
If an entrepreneur uses a third-party platform for trading, he or she can rely on the transaction statement and compare it with what is reflected in the accounting. If an entrepreneur has an internally created platform on which he trades, then a database of all transactions is also necessary. The extract or database must contain all transaction details, including the transaction ID that can be used with the blockchain explorer, the technical details of the transactions (between which wallets and when virtual currencies were moved, what is the fee for the transaction in the network, etc.).
It is also important to self-check the conversion of sales revenue from virtual currency to money before submitting data to the auditor. Transaction fees are usually charged on the currency used in the transaction, and if the transaction used virtual currency, the resulting income must be converted into money. Whether the sales revenue is converted to cash at the time of the transaction or once a day/week/month can significantly change the reported sales revenue, and when the revenue is converted to cash, it may not be immediately clear from the company’s data. Virtual currency market prices can fluctuate significantly even during the week or day, and with large transaction volumes, small differences with market prices can lead to significant differences.
Data downloading and processing may also be difficult to check for sales revenue due to the volume of transactions. If the company is small and trades virtual currency for itself, or if the number of customers is limited, then manual verification of transactions using programs such as Excel is still possible. If the undertaking has thousands of customers and hundreds of thousands or even millions of transactions per year, it becomes more difficult to verify them, this amount is no longer covered by Excel, and the auditor can use other programs designed for large-scale databases. On the other hand, the entrepreneur must ensure that the data is accessible and transferable, which would allow the auditor to analyse and control the entire volume of transactions.
Accounting for the revaluation of the value of virtual currencies
Income or expenditure may result from changes in the market price of the virtual currency during the year, and this change in the market price affects the carrying amount of inventories. It may be that in accounting of the undertaking it is recorded by one record on December 31 as the sum of the income or expenditure, and more detailed information on that consists of this sum, isn’t present.
The auditor asks the accountants how this was calculated and will want to verify this calculation, including what market prices and exchange rates were used and whether they were used correctly. However, it is not always possible to explain the process of calculating these indicators and prove their correctness if the platforms or accounting did not have the appropriate settings.
All providers of virtual currency services are obliged to ensure that their own funds do not fall below the criteria set out in article 72² of the Money Laundering and Terrorist Financing Prevention Act and in the activity licence. The auditors shall verify and confirm the accounting of the virtual currency service providers’ own funds with the Financial Intelligence Unit (Rahapesu Andmebüroo, hereinafter referred to as FIU) once a year on the due date of the annual report, i.e. 6 months after the end of the reporting year. The first own funds’ report shall be submitted depending on when the license of the virtual currency service provider was obtained.
Persons who had a valid license to operate before 15 March 2022 must submit the audited calculation of their own funds on the basis of the balance sheet drawn up at the end of the last reporting period no later than 1 January 2023. Management should take into account that it is practically impossible to conduct an audit for one day, and agree to conduct an audit on the balance sheet day of the last reporting period or another earlier balance sheet day.
In the case of licenses for activities that were issued after the changes in the law, it should be assumed that the audit firm should verify the fulfillment of the requirements established for the own funds of the virtual currency service provider as of the balance sheet date (should be between 15 March 2022 – 1 January 2023), and submit the corresponding conclusion by the deadline for submission of the report for the business year of the virtual currency service provider to the virtual currency service provider itself and to the FIU.
To verify the own funds of the virtual currency service providers, the auditor must verify the correctness of the volume of transactions, assets and liabilities, as well as when auditing or inspecting the annual report, as well as the correctness of the calculation of own funds, based on the instructions published by the FIU and the Ministry of Finance.
Based on the instruction of the FIU, assets in virtual currency in the calculation of own funds are considered intangible assets subject to deduction. Own funds also do not include virtual currencies and fiat money owned by customers or other intangible property (for example, the cost of developing platforms for trading virtual assets or providing wallet services). The procedures for controlling own funds in terms of virtual currencies can be simplified or, under certain conditions, not applied, if they do not affect the correctness of the calculation of own funds.
Frequently asked questions
Yes, an Estonian company can apply for a cryptocurrency license under the Money Laundering and Terrorist Financing Prevention Act. The purpose of this law is to prevent the use of the financial system and economic space of the Republic of Estonia for money laundering and terrorist financing by increasing the reliability and transparency of the business environment.
This law regulates the principles of assessment, management and hedging of risks associated with money laundering and terrorist financing, supervision of responsible persons, obligations arising from the collection and publication of data of beneficial owners, obligations related to the collection and publication of data on owners of payment accounts, liability of obligated persons in case of violation of the requirements arising from the legislation.
In order to obtain a crypto-license in Estonia, you first need to establish a company in Estonia. Once the company has been established, you can apply for a Virtual Currency Service Provider License on the website of the Estonian Ministry of Economic Affairs and Communications. A Member of the company’s Board of Directors can apply for a cryptocurrency license in Estonia electronically.
The state fee for an application for a license is 10,000 EUR. The fee must be paid to the Estonian Ministry of Finance. Rahapesu andmebüroo (RAB), an independent structure within the Police and Border Guard Board, examines the issue of a license within 60 working days after the submission of the application. The crypto-license is issued for a timeless period.
No, under the new regulatory framework, the Financial Intelligence Unit (FIU) provides a license called Virtual Currency Service Provider, which has consolidated the previous license forms into one. You can apply for a single cryptocurrency license on the state website https://mtr.mkm.ee/.
The state fee payable to the Estonian Ministry of Finance (Rahandusministeerium) is 10,000 EUR. The state fee can be paid to one of five accounts of the Estonian Ministry of Finance:
SEB Pank: EE891010220034796011
The RAB notifies its decision to issue a license within 60 working days, but if necessary, this period can be extended up to 120 days (§ 71 Rahapesu ja terrorismi rahastamise tõkestamise seadus).
Yes, non-residents of Estonia can be the full-fledged owners of an Estonian crypto-company, however, it should be borne in mind that a real/physical office, as well as the Board of a cryptocurrency company, must be located in Estonia.
According to the Law on the Prevention of Money Laundering and the Financing of Terrorism, at least one of the Board Members must be a resident of Estonia. The Board of a cryptocurrency company must be located in Estonia. It is also necessary to provide information about accounts in banks and payment systems that are opened in the name of the company.
Yes, a company applying for a crypto-license must have an account with a financial institution registered in Estonia (one of the Estonian banks or an international banking service provider registered in Estonia).
The minimum share capital is 100,000 EUR. The share capital must be paid in full prior to filing the application. You can deposit the share capital for a cryptocurrency company only with a cash contribution from the personal account of the owner/owners to the company’s account.
The crypto license is issued for a timeless period.
No, you can deposit the share capital for a cryptocurrency company only by fiat contribution from the personal account of the owner/owners to the company’s account.
Payment of the share capital is made using a fiat contribution (in cash or by bank transfer). The Members of the company’s Board of Directors pay a contribution equal to the par value of their share (i.e. corresponding to their share in the authorised capital). The payment is made from the bank account of a Board Member to the bank account of the company.
The deposited amount can be used for any commercial activities of your crypto-company after a note appears in the Estonian Commercial Register that the share capital of the company has been paid.
Full payment of the minimum share capital of a crypto-company (100,000 EUR) is mandatory before applying for a single cryptocurrency license in Estonia. This amount can be further used to finance the commercial activities of the company.
The prerequisites for applying for a cryptocurrency license are:
- The Board of Directors and place of business must be located in Estonia.
- Paid share capital (at least 100,000 EUR).
- The presence of a Director (an Estonian resident) of the company is mandatory.
- Account with a financial institution registered in Estonia (one of the banks in Estonia or an international banking service provider registered in Estonia).
Nothing attracts entrepreneurs more than the speed and cost of launching a project, and there is no doubt that at the moment there is little to no rivals to Estonia on the world stage. Only one cryptocurrency license is required in order to legalise any crypto-activity in Estonia, which strengthens country’s position among the most convenient and preferred jurisdictions for launching a blockchain project, and the financial costs of the legal part are several times lower than in other countries.
We suggest that you familiarise yourself with the section in our blog entitled “Comparison of Favourable Jurisdictions for Establishing a Crypto Business”.
Yes. The physical office can be visited by the regulator at any time to check the documentation and confirm the firm’s activities. The physical office of a crypto-company must be located in Estonia and correspond to the company’s activities.
No, the Director of the company must be a resident of Estonia and reside in Estonia.
Our company has extensive experience in obtaining cryptocurrency licenses in Estonia and is ready to accompany you throughout the entire licensing process.
We will help in the establishment of a company that meets the requirements of the regulator, we will help with drawing up procedural rules and risk assessment, AML/KYC documents.
Company in Estonia OÜ can also assist in the search and recruitment of an Estonian Director for your company and train them in client identification requirements in accordance with the Law on the Prevention of Money Laundering and Terrorist Financing. It should be noted that the chosen Director will be a member of your company only, which complies with the non-competition provision and will represent it in communication with the regulator.
We can find an office that fully meets the requirements of your company. In addition, we will help with opening a bank account for depositing share capital and opening a current account for working with crypto-exchanges.
The specialists of Company in Estonia OÜ will be happy to keep you informed of all the latest changes in Estonian legislation and are always ready to answer all your questions.
It should be borne in mind that a crypto-license is issued for a specific project, with a specific Owner, Director, and KYC/AML Officer, whose identity is carefully verified during the licensing process. Also subject to review are procedural rules, risk assessment documentation, and AML documents.
If a company with a crypto-license changes the Owner, Director, or KYC/AML Officer, then the representatives of the regulator will study the information again, and there is a great risk that the license will be revoked, since it was issued for a completely different project.
The term for reviewing new participants in the company and the project itself is 2 months and is absolutely identical to the time for obtaining a crypto-license for a new project. It should also be noted that the license is suspended at the time of the review.
The most common problem today is the revocation of licenses from crypto-companies that have changed their Owners in the course of their existence. Also, a common problem is the Director’s inadequacy and the inability of the KYC/AML Officer to fulfill their duties. Many companies have lost their licenses due to the lack of contributed share capital or problems with a physical office that did not meet the requirements of the regulator.
Sometimes legal companies offer their clients ready-made solutions – companies with already obtained crypto-licenses. But at the same time, they are silent about the problems that may arise in the process of changing Owners. Obtaining a crypto-license by an Estonian citizen lawyer is a much simpler process than obtaining licenses for companies owned by non-residents. After re-registration of such a company with new Owners, the licensing process, in fact, begins from the very beginning.
The next frequently encountered problem is a nominal KYC/AML Officer who has no idea about the law on the basis of which the license was obtained and about the real activities of the company in which they are employed.
Law firms often offer the services of a private KYC/AML Officer or Nominee Director to many companies at the same time, thereby jeopardising the licenses and reputation of all their clients. Based on the information we have, over 500 crypto-companies have lost their licenses due to such fraudulent schemes.
Before starting the licensing process, you should understand that quick and cheap solutions are excluded, and by agreeing to them, you take full responsibility for the loss of time and money.
Opening a bank account for a company with a high-risk activity, which is cryptocurrency, is a complex issue requiring special attention. It is worth considering the fact that none of the Estonian banks works with companies of similar activity, and it is impossible to buy a company with an open bank account.
Our company has partner banks throughout Europe that are ready to work with cryptocurrencies, and we will be happy to accompany our clients in opening a current account.
Requirements for the requesting company
- The company applying for a license must have paid a share capital (100,000 EUR).
- The company applying for a license must have an office in Estonia.
- The company applying for a license must have a representative in Estonia (one of the Board members).
More information regarding rules, money laundering and terrorist financing prevention can be found here.
Contribution of share capital
According to §136 of the Estonian Commercial Code, “the share capital of a company must be denominated in euros”. Accordingly, the authorised capital of a crypto-company cannot be denominated in cryptocurrency.
The share capital is paid in cash or by bank transfer. The members of the Board of the company make a contribution in the amount corresponding to their share in the share capital. The payment is made from the bank account of the member of the Board to the bank account of the company.
The deposited amount on the corporate account can now be used for any commercial activity of your business. Thus, the share capital can be used to invest, pay the company’s suppliers, or even offer loans. However, it should be noted that dividends can be paid exclusively from the profits of your company.
AML specialist interview with FIU (Financial Intelligence Unit)
In accordance with the new policy regarding the licensing process for crypto-activities, the FIU may invite a KYC/AML specialist for a personal meeting prior to issuing a license. The purpose of this interview is to confirm that the contact person is familiar with the AML procedure rules and the relevant Estonian laws in case of suspicion of money laundering or terrorist financing. If the KYC/AML officer is not part of the company structure, it is necessary to provide documents confirming the employment relations between the company and this person. Failure to comply with this requirement will be grounds for refusal of issuing the license.
There is a 60-day period to turn up for an interview with the FIU. The final decision on the licensing of the company is published after a two-hour meeting. Please note that the interview is conducted in Estonian and an experienced translator may be required to accompany it. If the client does not comply with this clause within the specified timeframe, the crypto-company license application will be automatically annulled.
In addition, the FIU also revokes a license if:
- The undertaking repeatedly fails to comply with the FIU regulations.
- The undertaking has not been commercially active in the field within 6 months from the date of the license.
Company in Estonia OÜ offers a wide range of additional services, such as assistance in selection and rental of an office; assistance in making company share capital contribution; assistance in recruiting a local Company Director, signing a working contract; training of a Company Director for KYC/AML requirements; as well as KYC/AML Officer services. Also we will be happy to assist with receiving a crypto license in Lithuania.
An individual customer approach is vital for us. We take care of your business needs, combining both personalised order processing and professional consulting, reasonable rates, and company registration services for clients from all over the world. In addition, Company in Estonia OÜ provides continuous support to entrepreneurs in accordance with the latest updates in Estonian legislation.