[vc_row][vc_column][vc_column_text]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. [/vc_column_text][/vc_column][/vc_row]
[vc_row][vc_column][vc_column_text el_class=”padding”] Investing in cryptocurrency in Estonia is common by starting a crypto exchange. Cryptocurrencies in this country are strictly regulated. A license must first be obtained, a bank account opened, and other legal procedures followed regarding crypto exchanges or funds.
In Estonia, crypto activity can take place in two different ways. In the following section, you will find information on Estonia’s crypto taxes.
When buying, selling, or exchanging virtual currencies, the price of the currency may change
A virtual currency is mined
Cloud storage capacity is being rented out
The receipt of a virtual currency salary
Estonia treats income received from virtual currency investments as traditional cash income and taxes it accordingly. The purchase or sale price as well as any received income or cost must be converted into euros at the exchange rate of the virtual currency ruling the market at the time of receipt.
Exchanges, purchases, or sales
Cryptocurrency gains are subject to Estonian taxes.
It is important for individuals to declare their incomes if they generate income from purchasing cryptocurrency, selling cryptocurrency online, or exchanging cryptocurrency for another kind of money, where the difference between what they sold and bought is the income, or, if they exchange, the difference between the price of a property received and the price of the virtual currency purchased. Taxation of cryptocurrency gains in Estonia
Mining
Private individuals who mine cryptocurrency independently and do not pay income taxes must declare their cryptocurrency income as business income and pay taxes on it.
Furthermore, a sole proprietor mining virtual currency continuously must register himself in the Business register. Private individuals who are registered as sole proprietors may deduct business-related expenses from their income.
Cloud storage capacity can be rented
Rental income is used to declare gains from renting the storage capacity of a private person’s computer. The income from mining cryptocurrencies and renting out storage capacity is regulated by the government if it is a business activity.
Currency-based salaries
The market price of virtual currency must be converted into euros by employers before paying employee salaries in Estonia.
Value Added Tax
VAT is not charged on the exchange of virtual currency for traditional payment methods. Cryptocurrency transactions also do not require a VAT number to be registered.
TAXATION OF COMPANIES
Cryptocurrencies are not subject to any specific tax. The laws governing crypto businesses in Estonia are the same as those governing other types of businesses.
Among European Union countries, Estonian companies are taxed the most profitably.
In Estonia, corporate taxes are 0%. Dividends are taxed at 20 percent and profit distributions at 80 percent. Dividend payments are taxed at 25%. Dividend payments require a profit statement to be prepared by a member of the company’s Management Board.
VAT in Estonia is 20%. Upon exceeding 40,000 EUR in sales in Estonia in one calendar year, companies are required to register a VAT number. It is also possible for a company to register for VAT before reaching this threshold.
If your crypto company requires accounting services, LKS Consult OÜ will be happy to help. Additionally, we are able to provide information regarding cryptocurrency taxation in Lithuania upon request.[/vc_column_text][/vc_column][/vc_row]
An investment fund (AIF) is a specially constituted entity whose assets can be invested in accordance with a predetermined investment policy. The purpose of an investment fund is to generate profits from the investment of its assets.
AIF is the most convenient structure for collective investment. Investors’ assets are attracted to their further use and placement in their interests following a predetermined investment policy under the company’s guidance that managed the fund.
An Alternative Investment Fund is the best solution for making collective venture capital investments and organizing investor funds in stocks, bonds, commodity indices, derivatives, currencies, cryptocurrencies, real estate, and other financial assets.[/vc_column_text][/vc_column][/vc_row][vc_row height=”auto” css=”%7B%22default%22%3A%7B%22padding-bottom%22%3A%2240px%22%7D%7D” bg_type=”bg_color” bg_override=”full”][vc_column][vc_column_text el_class=”padding”]
Requirements
An investment fund in Estonia requires two structural units — the fund itself as a holder of property assets and the fund manager — the legal entity that manages one or more funds.
Fund manager
The fund manager manages the assets of a fund company or a contractual fund. It is important to note that one management company can manage several funds.
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 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 manager can only manage non-public investment funds, meaning their business is primarily aimed at professional investors.
If a small unlicensed fund management company does not wish to apply for a licence as a small fund manager, they have to register their activities with EFSA. EFSA’s supervision over registered unlicensed small fund managers is limited to the registration and later data collection.
The decision by EFSA is usually made within two months of documents submission.[/vc_column_text][/vc_column][/vc_row][vc_row height=”auto” css=”%7B%22default%22%3A%7B%22padding-bottom%22%3A%2240px%22%7D%7D”][vc_column][vc_column_text el_class=”padding”]
Fund types
There are several types of funds. The type of investment fund chosen depends on the activity, the target investors and the amount of capital raised/assets managed:
A joint-stock fund (aktsiaseltsfond) — a fund established as a joint-stock company, its property cannot be divided into structural elements (sub-funds)
participation in the fund in the form of ownership of shares
can be closed and open
limited scope for stock types and securities (no predominant shares, no debt receipts)
upon establishment — the management and deposit contract is signed. The charter is agreed with FIE
includes shareholders, board members and the council.
Contract fund (lepinguline fond) is a legal entity, the holder of property assets, which is formed from payments received by the sale of shares or other property or funds/property from investments and which belongs to the holder of the shares. The assets of the fund can be divided into structural elements, each of them must have a different investment policy (relevant if the fund consists of different types of property – real estate, securities, other assets).
An investment prospectus is obligatory
the fund cannot be reorganized into another fund
the shareholder can always demand the redemption fund
shares may contain different specific conditions (e.g. right of exchange, terms of ransom, voting rights, etc.)
upon establishment – the fund manager and the depository shall be specified. The charter shall be agreed with FIE
ruled by the meeting of the owners.
The limited partnership fund (usaldusfond) 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 assets.
The share in such a fund is freely alienated unless the agreement states otherwise. Equity holders should contribute to the fund.
The Estonian Real Estate Area provides fund managers with the possibility to organize the collection of investments and further management of collective assets within the framework of the simplified regulation of the manager of small alternative funds (small alternative fund manager). This regime makes it easy to create an investment fund in Estonia and allows partners to form flexible relations between themselves within the framework of the limited Partnership Agreement «LPA». The small alternative fund manager has the right to control several funds. Still, the total assets of the managed funds may not exceed €100 million, or in the case of investments of long duration (from 5 years or more) and no financial gain is used (credit arm), the total assets of the funds can reach 500 million euros.[/vc_column_text][/vc_column][/vc_row][vc_row height=”auto” css=”%7B%22default%22%3A%7B%22padding-bottom%22%3A%2240px%22%7D%7D” bg_type=”bg_color” bg_override=”full”][vc_column][vc_column_text el_class=”padding”]
Registration process
As we already mentioned, cryptocurrency fund registration is not a difficult process. It consists of the following steps:
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)
AML 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.
LKS Consult OĂś assists in registering alternative investment funds in Estonia. We accompany and assist our clients in managing investment and financial structures from idea discussion until the project’s launch. Any collaboration usually starts with a consultation to discuss main principles and decide on the future company’s structure. During the next stage, we prepare a legal opinion on the subject of the fund’s activity and make a circulation map for registration. Preparations usually take up to 3 months. We also provide accounting services in Estonia.[/vc_column_text][/vc_column][/vc_row]
There are many ways to obtain virtual currency, including digitized, stored, sold, and accepted as a form of payment by individuals and institutions.
A fast-growing trend in cryptocurrency has taken over the global economy. Cryptocurrency investments are still beneficial, despite the debates over its fragility.
Due to its reliability, accessibility, and independence, cryptocurrency surpasses traditional payment methods. Cryptocurrencies can also be used as a modern method of earning money in addition to allowing enterprises to invest.
There are several reasons why investors from around the world invest in the Estonian cryptocurrency market. Estonian law provides certain advantages to cryptocurrency businesses. The following are among them:
The work is fully legal
Government regulation contributes to credibility and stability
The tax system should be transparent
A market brimming with enthusiasm
Online applications are available for all applications
Estonia also does not impose a corporate tax. A 20% corporate income tax applies to only distributed profits of 20/80 of the net profit distribution. The Estonian tax system allows companies to reinvest profits tax-free, so they are able to benefit from a tax-free investment scheme.
A SHORT HISTORY
As a result of Directive No. 2015/849 adopted by the European Parliament and Council, the Republic of Estonia entered into force a new Law on Money Laundering and Terror Financing on November 27, 2017. Companies are permitted to provide customers with exchange, transfer, and storage services of crypto and virtual currencies with the following licences:
Fiat-to-virtual currency exchange license for the provider
Service provider’s license for virtual currency wallets
Fiat currency can be exchanged for cryptocurrency and vice versa with the first type of licence. Virtual currency e-wallets are allowed under the second license.
Virtual currency service providers will, however, be regarded as “financial institutions” as of March 10, 2020. A virtual currency service provider license was thus created by merging both licenses. All Estonian financial institutions must comply with the same reporting rules and regulations as crypto companies.
REQUIREMENTS
Cryptocurrency licenses can be applied for by members of the company’s Board of Directors. License applications can be submitted electronically with an e-Resident card at a notary in Tallinn or through our representatives who will be able to apply on your behalf using the power of attorney you provide us.
Applicants for a cryptocurrency license must pay a fee of 3,300 EUR. Payment is required to be made to the Estonian Ministry of Finance (FIU). Upon submission of an application, the Bureau of Data decides whether the Money Laundering (RAB) license will be granted within 60 working days. The ease of the process does not mean that the regulations are not taken seriously.
As a result of recent amendments to the Money Laundering and Terrorist Financing Prevention Act, companies applying for Estonian crypto-licences have been required to meet the following stricter parameters:
Before applying for a crypto-licence, a crypto-company must pay its full share capital of 12,000 EUR. Besides financing the company’s commercial activities, this amount can be used to finance its other activities as well.
It costs 3,300 euros to register with the Estonian government.
Applicants must have corporate IBAN accounts. Crypto-companies cannot open bank accounts with Estonian banks. The European Electronic Money Institution, however, allows companies to open accounts.
An Estonian Management Board is required, as well as an Estonian location for the business.
Estonian legal offices are required for companies applying for licenses.
Estonian citizens are required to serve as Company Directors.
An interview with a RAB will be required after the KYC/AML officer has applied for a crypto-licence.
BANK ACCOUNT
Opening a bank account is a major challenge for crypto-enterprises. In Estonia, it is not possible to open a bank account because no Estonian bank works with high-risk companies (Crypto, Gambling, Gaming, CBD, Adults). Crypto-businesses are under stringent supervision as quite often their owners tend to run fraud operations and break the law by, for example, sponsoring terrorism.
More and more cryptocurrency businesses continue to develop and emerge, despite traditional banking institutions’ slow adaptation to virtual currencies’ contemporary world reality. Getting a banking account is an important step for any crypto company since it is required to operate, serve customers, and receive payments.
Additionally, companies in high-risk industries require more expense and complexity to open and maintain accounts than companies in other industries. Document collection and compliance with regulations are the most challenging parts of the process.
When it comes to crypto businesses, which face a higher level of risk, risk assessment is also important, as it helps prevent unexpected problems. A risk assessment and a detailed market overview can be obtained by consulting professionals.
We will work with you to determine the most suitable and profitable crypto-company solution and save you money and time. After analysing many banks and payment service providers, we found the best options for high-risk businesses to open an account. As an Estonian law firm and accounting firm, we offer a range of services.
Getting a cryptocurrency license from LKS Consult OĂś will be easy with the help of our specialists. We offer an all-inclusive package called Company & Crypto-Licence in Estonia based on customers’ needs from around the world, which includes the registration of an Estonian company and all the necessary services for obtaining a crypto-license. Assisting with:
Documentation preparation.
Establishing a company’s KYC and procedural rules.
Support during the entire license application process, including translation of documents into Estonian.
[vc_row][vc_column][vc_column_text]So far, digital currency-based funds are the best solution for investors who have no experience with crypto assets but want to make a profit.
The interest in cryptocurrency is growing these days rapidly. However, if an investor doesn’t have experience with crypto assets but wants to start making money from them, the best solution is to use cryptocurrency funds. It will be the best way to enter the market.Â
LKS Consult OĂś explains how the funds operate.
Cryptocurrency funds can be compared to conventional exchange funds linked to a certain sector of the economy, but in this case, they are linked to digital money.
Such funds purchase mainly bitcoin and other liquid promising cryptocurrencies. The profit, in this case, will depend on the growth of cryptocurrency quotes. These funds may have a margin of flexibility in cash to actively manage their position in the cryptocurrency market. Once the purchased assets have grown in value enough, they are sold, and investors get their share of the profits.
Short- and long-term investments in cryptocurrency funds now seem reasonable. However, LKS Consult OĂś reminds you that it also involves risks. When investing in a large cryptocurrency fund, all key risks are predetermined, and the investor may be more comfortable with their funds.
Large crypto-funds predict a certain risk management policy, which outlines the levels of risk capital (potential losses) and the level of balance that will be returned to the investor. Still, please remember, cryptocurrencies, like all assets, can not only grow but also fall.
When choosing a cryptocurrency fund, it is essential to explore the market’s reputation and the history of how it works. One sign of fraudulent funds is the promise of guaranteed high returns to investors.
Large crypto-funds
Large cryptocurrency funds are an essential part of the crypto-infrastructure. They act as intermediaries between the cryptologist and institutional investors whose entry into the market has become a critical factor in its growth. The more funds and the larger they are, the more mature the entire crypto-scope becomes.
Grayscale Investments is the largest cryptocurrency fund. It is owned by Digital Currency Group (DCG), which also owns CoinDesk crypto-media. Grayscale now manages assets worth over $45 billion. In 2019, that amount was $0.6 billion, and in early 2020, it was $1.8 billion. In addition, the foundation has several trusts, focusing on a single coin — for example, Grayscale Bitcoin Trust and Grayscale Ethereum Trust.
Polychain Capital is the premier investor in cryptocurrency protocols and companies with more than $1.100 billion of assets under management. It is an American fund with an active management strategy, invests only in cryptocurrencies, not crypto-companies. It has been operating since 2016.
Pantera Bitcoin Fund was founded in 2003 in the United States as a traditional investment fund. In 2013, he focused on cryptocurrency and venture capital investments in the blockchain company. It has $810 billion of assets under management.
CoinShares was launched in 2014, and it became Europe’s first and largest bitcoin investment fund. Having offered the world’s first bitcoin-based securities in 2015, the company has gone on to command investment firms outside of crypto with more than $1 billion of assets.
CoinCapital is a hedge fund specializing in cryptocurrencies, ICO and blockchain startups. The threshold of entry for individual investors is from $2.1 million.
Multicoin Capital is an active trading fund that invests in more than 10 cryptocurrencies and about two dozen blockchain startups, among which is the largest cryptocurrency, Binance.
BlockTower was founded in 2017 and is based in Stamford, CT. It is a crypto and blockchain investment firm applying professional trading, investing and portfolio management to this digital asset class. It focuses on event-driven trading strategies and investments and has $100 billion of assets under management.
BitSpread is a distinctive feature of the fund that is very active in trade. He performs several thousand operations during the day, trading cryptocurrencies for about $1 billion a month.
Galaxy Digital Assets Fund is a fund known primarily through its founder Mike Novogratz, the former chief investment director of Giant Fortress Investment Management. Galaxy Digital invests in digital currencies, ICO and related companies.
Alphabit Fund is a crypto hedge fund that seeks to generate capital appreciation while reducing risk. On its website, the company claims: “We aim to advance the overall development of the sector by investing in and sharing our expertise with the most visionary and innovative projects we can find” and has about $25 million of assets under the management.
[vc_row][vc_column][vc_column_text]Tesla’s founder, Elon Musk, recently struck Bitcoin with another blow – he had previously actively supported Bitcoin but later stated that his company would no longer accept it as a means of payment. Musk attributed this decision to the fact that bitcoin is harmful to the environment: it requires large amounts of electricity produced by coal and other fossil fuels. Many financial experts warn that investment in Bitcoin is extremely risky because cryptocurrency can change very quickly and is not backed by any tangible assets. Others see it as a promising and effective financial instrument. Most of the world’s central banks, including the Bank of England, are considering creating their digital currency.
Some experts also doubt that Bitcoin can serve as an alternative world currency. Bitcoin.com spokesman Roger Vere told the BBC that other cryptocurrencies might be much more suitable. “For cryptocurrency as a whole, this is very good, but most of the world simply does not understand that bitcoin no longer works as a currency”, he believes. “Other currencies, such as Bitcoin Cash, Monero or ZCash, are doing much better. Bitcoin can only make about three transactions per second. There is no chance that a network capable of three transactions per second could become a currency for the world.” According to Vera, other cryptocurrencies are also more easily transferable, requiring much less commission than bitcoin.
Estonia is a country where cryptocurrency is legalized at the state level and it is possible to obtain a cryptocurrency license.[/vc_column_text][/vc_column][/vc_row]
[vc_row][vc_column][vc_column_text]President Nayib Bukele of El Salvador has promised to make Bitcoin the official currency of the country. If Parliament approves this plan, El Salvador will be the first state in the world to give a cryptocurrency a similar status.
El Salvador, a small country in Central America, does not have its currency and uses the United States dollar as payment currency. President Bukele stated that recognition of Bitcoin would make it easier for nationals working abroad to send money home. «In the short term, this will lead to the creation of new jobs and will help to attract to the financial world thousands of people living outside the formal economy», said the head of El Salvador during a conference dedicated to Bitcoin in Florida.
Bukele promised to submit a bill to the Salvadoran Congress the following week to recognize Bitcoin as a means of payment formally.
The economy of El Salvador depends to a large extent on the resources that nationals abroad send home. This money accounts for about 20% of the state’s GDP.
El Salvador has a population of about 6.4 million, with more than 2 million citizens living abroad and transferring more than $4 billion each year. Banks charge a commission for such transfers, they can take days, and sometimes residents have to come in person.
According to Bukele, the transition to Bitcoin «will improve the lives and future of millions of people». The President gave no further details on how the cryptocurrency would be integrated into the country’s financial system.
Estonia is a country where cryptocurrency is legalized at the state level, and it is possible to obtain a cryptocurrency license.[/vc_column_text][/vc_column][/vc_row]
A virtual currency service is a service specified in paragraphs §3 10) and 101) of the Prevention of Money Laundering and Terrorist Financing Act (RahaPTS):
virtual currency purse service is a service that creates or stores encrypted keys for clients that can be used to store, store and transfer virtual currencies;
A virtual currency exchange service is a service where a person exchanges a virtual currency for money or money on a virtual currency or one virtual currency for another.
Virtual currency is a value represented in digital form that can be digitized, stored or sold and accepted as a means of payment by individuals or entities. Still, it is not a legal tender or financial instrument of any country in accordance with Directive (EC) 2015/2366 of the European Parliament and the Council on Payments Services in the Domestic Market. Amendment of Directives 2002/65/EC, 2009/110/EC and 2013/36/EU and Regulation (EU) 1093/2010 and repeal of Directive 2007/64/EC (OJ L 337, 23.12.2015, pp. 35-127) within the meaning of Article 4 (25) or payment instrument or payment transaction within the meaning of Article 3 (k) and (l) that Directive.
FIU licence is required if the / token coin created by ICO conforms to the definition of virtual currency in §3 (9) AMLA and the company plans to buy or sell it.
Often created token is not accepted as a means of payment by other people, so it cannot be considered as a virtual currency in the sense of RahaPTS (although other functions correspond to a virtual currency), again, the company does not require a license to buy or sell the token. Since some types of ICO may include activities as an investment firm or loan brokerage services, a company may require a licence issued by the Financial Supervision Authority to provide such services. In the case of such services, please contact the Financial Inspectorate to apply for an operating licence or to assess the need for an active licence.
To provide a service of a virtual currency purse, a company that provides a service that includes storing another person’s virtual currency in such a way that the company has an overview and some control over transactions in the purse must apply for a license. In the case of virtual currencies, this is done through a service consisting of creating encrypted keys for clients that can be used to store, store and transmit virtual currencies.
Legal framework
The application for a licence to operate, the requirements and grounds for refusing an activity licence and for revoking an activity licence are regulated by articles 70-75 of the Money Act and articles 15-22, 24-25, 30, 32-33, 34, 36-40 Law on the General Part of the Code of Economic Activities (hereinafter MSĂśS)
What information should be provided when applying for an activity licence?
In addition to the provisions of the MSĂśS, the following information and documents must be submitted in the licence application:
The address of the service, including the address of the site;
Name and contact details of the person responsible for providing the service for all places of service referred to in paragraph 1;
If the enterprise of a legal entity is not registered in the Estonian Trade Register, the name, register or the personal code of the owner of a legal entity, in its absence – date of birth, place of birth or address of residence, name, personal code, date of birth, place of birth and address of residence;
The name, personal identification code, if absent, date of birth, place of birth and address of residence of a member of the administration and prosecutor of the service provider who is a legal person, If the service provider is not an enterprise registered in the Estonian Business Register; The Rules of Procedure and Internal Control prepared in accordance with §
14 and 15 of the Monetary PTS and, in the case of persons with special duties listed in §
20 of the International Sanctions Act, Rules of procedure prepared in accordance with the International Sanctions Act, 23 and its verification;
Name, personal identification code, if absent, date of birth, place of birth, nationality, address of residence, position and contact information of the contact person appointed in accordance with § 17 PTC in respect of money;
Name, personal identification code, if absent, date of birth, place of birth, nationality, address of residence, position and contact information of the person responsible for the international financial sanction imposed by the enterprise in accordance with subsection 20 (3) The International Sanctions Act;
If the enterprise, a member of its administration, the prosecutor, the beneficial owner or the owner is a foreign national, a service provider established in a foreign State or, if the enterprise is a foreign service provider, Issuance of a criminal record certificate or equivalent by a competent judicial or administrative authority or in connection with another intentionally committed criminal offence; The issue of which has not occurred for more than three months and which has been notarized or legalized or certified by a certificate replacing legalization (apostille), unless an international agreement provides otherwise;
If the enterprise, a member of its management body, a prosecutor, a beneficial owner or a self-employed person is a foreign national, a copy of the identity documents for all countries of citizenship and non-custodial documents referred to in paragraph 8; For a member of an administrative body and a prosecutor, documents containing the level of education, a complete list of posts and positions and, in the case of a member of an administrative body, duties, as well as documents which the applicant considers important to prove; NB! The certificate of education (diploma) must be submitted together with the application for the license.
A list of payment accounts opened in the name of the company, with the unique identifier of each payment account and the name of the account holder; NB! All open payment accounts must be submitted together with an application for a licence to operate in the Register of Economic Activities, to which must be attached a certificate from a credit institution, an electronic money institution or a payment institution, the existence of a payment account.
Information on which virtual currency service will be provided.
Requirements to the applicant
In order to obtain a licence to operate, an enterprise must comply with the following conditions of control:
A company, a member of its administration, a prosecutor, a beneficial owner and an owner shall not be liable to any applicable penalty for a crime against the State, money-laundering or other intentional criminal offence;
The company, a member of its management body, the prosecutor, the beneficial owner and the owner, have a good business reputation. The licensee of an activity must assess the existence of a proper business reputation in the light of the person’s prior activities and the circumstances surrounding it. It is presumed that there is a proper commercial reputation in the absence of opposing circumstances;
The contact person appointed by the enterprise in accordance with § 17 Money PTS meets the requirements established by law. Only a person with education, professional ability, necessary abilities, personal qualities and experience and an impeccable reputation may be appointed as a contact person;
If the company has a subsidiary that prefers to use the licence to operate requested on behalf of the company, the subsidiary must also comply with the above requirements;
The registered office, the board and the place of activity of an enterprise applying for a license for activities in the sphere of the provider of virtual currency must be located in Estonia, or a foreign company operates in Estonia through a branch, entered in the business register. The location of the board is assessed, for example, on the basis of the residence and citizenship of board members (the board member must be a resident or a citizen of Estonia) and other evidence of the board’s location. The place of business must comply with the requirements of article 29, paragraph 2, of the law on the General Part of the Civil Code (the place of business of a legal entity is the place of its permanent and permanent economic activity or other legally prescribed activity). If it is not possible to provide a virtual currency service on the site or to fulfill the requirements of RahaPTS, it cannot be a site. In practice, this means that those responsible for RahaPTS compliance work on the site have immediate access to the mandatory data received from RahaPTS, which the obligated person must collect, store and transmit to the supervisory authority, and have immediate access to them. Rules of procedure, risk assessment, internal control rules and other possible rules, additional documents to ensure compliance with the requirements arising from RahaPTS by the person under obligation and their employees. The place of business must also allow the FIU to exercise the supervision required by law, including on-site supervision. In the case of an application, a document confirming the right to use a place of business, such as a lease or lease, must be entered into the business register.
An enterprise applying for a license to operate in the field of a virtual currency provider must have an open payment account at a credit institution, an electronic money institution or a payment institution, established in Estonia or a Contracting State of the European Economic Area and providing cross-border services or a branch in Estonia. All open payment accounts must be submitted together with an application for a licence to operate in the Registry of Economic Activities, to which must be attached a certificate from a credit institution, an electronic money institution or a payment institution, the existence of a payment account. A list of payment accounts should also be added if the company already has a valid license for a virtual currency service, i.e. when changing a license;
The share capital of an enterprise applying for a licence to operate in this sphere of activity of a virtual currency supplier is not less than 12,000 euros, which is paid in full in cash and has to be confirmed by the data of the trade register.
What does the FIU control and can control during the licensing process?
Origin of the authorized capital of service providers of state duty and virtual currency.
Information on the convictions of the company and its associates, participation in various trials (criminal proceedings, misdemeanour proceedings, administrative proceedings, bankruptcy proceedings, etc. D.). Education and work experience, business connections. Of course, public sources and media are under control.
The Financial Intelligence Unit is also entitled to request information under §54 (11) and §58 (1) of the Money Laundering Act from other public authorities, as well as by order of third parties and pursuant to article 63 of the Money Laundering Act, also within the framework of the international exchange of information.
You can apply:
Entering the business register through a public portal (authentication is required for the use of the service);
through a notary.
Payment of government duty
To apply for an operating license, pay a government fee of €3,300 as a virtual currency service provider:
Swedbank – EE932200221023778606;
SEB – EE89101022003479 6011;
Luminor – EE701700017001577198;
LHV Bank – EE777700771003813400.
When paying, use the reference number 2900083015. In the explanation, state the name of the company and «Application for a license from the Financial Intelligence Unit».
Application processing
The sent application will be processed within 60 days after all necessary information has been provided, which can be extended to 120 days. The initial response from the Financial Intelligence Unit must be received no later than the third working day following the filing of the application. You will receive a license notice by e-mail. An activity licence is issued electronically and is valid indefinitely (if the activity licence has not been submitted on time). The FIU also indicates that if a company replaces persons involved in the circumstances of the subject matter (e.g., a board member, a contact person) during the activity/licence change procedure, The company must allow the FIU to verify the circumstances of the subject matter within 60 days. If the FIU is unable to verify these circumstances during this period, the FIU may refuse to issue an activity licence because the person does not fit the circumstances of the subject matter.
Modification of licence terms
If the circumstances have been verified as a precondition for obtaining an amendment to an operating license (see Candidate Requirements), you must notify the Financial Intelligence Unit at least 30 days before the planned change. The other shall be notified as soon as possible, but no later than within 5 working days, of any changes that have occurred independently and of any other information specified in the application for a licence to operate.
If you notify a change in a company, a member of its administration, prosecutor, beneficial owner or owner, the notice shall be accompanied by proof that there are no applicable fines if the person affected by the change is a foreign national. Other information referred to in article 70, paragraph 3, of the Monetary PTC must also be provided with respect to the member of the administration and the prosecutor.
Changes should be reported:
Entering the business register through a public portal (authentication is required for the use of the service);
through a notary.
Denial of operating license and revocation of operating license (§ 75 Money PTS, § 25 and § 37 MSÜS)
An activity licence will be refused or revoked if:
It appears that you knowingly provided false information when applying for a licence that affected the granting of the licence and which, if not granted, should have been refused;
you’re giving up economic activity (An enterprise that has not fulfilled the legal obligation to submit an annual report within six months of the expiry of this obligation is also deemed to have completely renounced economic activity). An enterprise that fails to provide the required annual confirmation that it has notified the FIU of any change in terms of the licence of activity is also deemed to have renounced economic activity.
Prohibition of the relevant economic activity applied to the enterprise in the relevant activity by a court decision or as a result of the law, with the exception of the prohibition of economic activity applied under the MSĂśS;
The enterprise is licensed by the Financial Inspection Authority;
The enterprise repeatedly fails to comply with the prescriptions of the supervisory authority, and repeated non-compliance also constitutes non-compliance with the two prescriptions and is assessed in proportion to the scope of the enterprise, the basis and the significance of the issued prescriptions;
the enterprise did not start activities in the requested sphere of activity within six months from the date of issue of the permit (pursuant to §34 (5) MSÜS, the right that if the company temporarily ceases to conduct business. It shall not suspend the obligation to engage in such activities for a period of six months);
The enterprise did not conduct the economic activity for two years from the date of issue of the operating license;
Requirements for economic activity included in the object of control of an activity licence or additional conditions of an activity licence have been substantially violated The Money Act (i.e. the enterprise no longer complies with the circumstances of the subject matter of the license to operate under §72 of the Act);
Activities authorized by a licence to operate cause significant damage or a threat to public order which did not exist or were not known at the time the licence was issued; which outweigh the interest of the enterprise in continuing the activity and which cannot be eliminated by changes in the license of the activity.
The specialists of LKS Consult OÜ will be happy to assist with the crypto-licence in Estonia as well as advise on tax-related issues in Estonia and provide accounting services.[/vc_column_text][/vc_column][/vc_row]
[vc_row][vc_column][vc_column_text]The boom around cryptocurrencies and their fantastic returns in 2016-2017 was a crucial factor in the emergence of investment funds in the crypto sector. Then, investment in cryptocurrency against the backdrop of low returns on traditional assets looked very attractive. This was facilitated by the emerging market, relatively weak competition, a plethora of inexperienced start-up investors and the opportunity to earn hundreds and thousands of per cent per year.
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.
Large cryptocurrency funds with a high threshold of entry are necessary intermediaries for institutional investors to enter the crypto environment. Because of legislative constraints, particularly large investors in many countries cannot buy digital assets directly.
Smaller crypto funds, directed at retail investors, are suitable for those who want to make a profit but are not prepared to invest in cryptocurrency on their own. In such funds, specially trained managers and managers handle asset selection and trade. The depositor does not have to monitor the news, choose coins, worry about the course and balance of the portfolio – all for him, professional will do. Among the drawbacks of small crypto funds is that usually, money cannot be withdrawn before a certain date.
Types of cryptocurrency funds
By investor access, cryptocurrency funds are divided into:
Private — only qualified investors can buy their shares. These are the largest funds in the market, accumulating tens of billions of dollars.
Open — available to retail investors. Such funds are unregulated when the depositor simply buys the shares of the fund and regulates, or stock exchange (ETF), where the fund’s shares can be traded on the exchange.
ETF (Exchange-Traded Funds) is a crypto fund whose shares are traded on a stock exchange, which anyone can purchase. The fund itself buys crypto assets and then sells a share of the portfolio in security. This allows investors to invest in cryptocurrencies without buying them directly. To do so, they need to open a brokerage account. It is believed that the extension of ETF to cryptocurrencies would dramatically increase the number of investors in digital assets. Indeed, even those who have greater confidence in traditional investment instruments could invest in them since ETF is governed by securities law, and the fund is responsible for safeguarding coins.
By type of investment, funds can be divided into:
Venture capital — when the foundation invests money in blockchain and crypto companies. These are funds for large capital – not for a usual investor to enter them.
Hedge Funds — make profits from investments in digital assets.
Hedge funds also make money from increases in the price of crypto assets, but their shares are not traded on the stock exchange. Most often, regulated fund shares are available only to qualified investors, and the entry threshold starts at several hundred thousand dollars. For example, American hedge funds can only work with qualified investors with a capital of $5 million, and foundations in offshore jurisdictions can only work with investors with a capital of $100,000. Unlike ETF, hedge funds are much less regulated. They can be invested in almost any risky asset, including cryptocurrency.
Traditional hedge funds tend to follow active trading strategies in which they buy and sell cryptocurrencies in short periods in order to profit from fluctuations in their exchange rates.
Background
The financial world slowly recognized cryptocurrency as a viable type of investment. The first cryptocurrency fund, Metastable Capital, was launched in 2014. But until 2017, they were not very popular – in four years, only a few dozen crypto funds were released on cryptography.
But 2017 was the year of cryptocurrency among retail investors. Millions of people around the world were buying cryptocurrencies, but inexperienced newcomers needed professional help. The first institutional investors also began to emerge.
LKS Consult OĂś offers “Creating a Cryptocurrency Fund” service. The team of experts of LKS Consult OĂś is happy to accompany your project in the necessary procedures for preparing documents and obtaining a license for an Alternative Investment Fund in Estonia. Our team offers full support on all stages of developing your business, and offer a variety of services, including accounting services in Estonia.[/vc_column_text][/vc_column][/vc_row]
If you live in Estonia and earn money from virtual currency, here are some things you should know.
The government responds to the rapid growth of cryptocurrency by implementing new regulations, even as more and more people invest in virtual currencies.
Investing in cryptocurrency in Estonia is commonly done through crypto exchanges. There are strict regulations governing the use of cryptocurrency in this country. You should first obtain a license, open a banking account, and follow other legal procedures with regard to crypto exchanges/funds.
The situation, however, needs to be viewed differently when we look at an individual’s income.
The price of virtual currency changes when it is bought, sold, or exchanged
A virtual currency is mined
Cloud storage capacity can be rented
The ability to receive salary in virtual currency
Investments in virtual currencies are taxed the same way as investments in traditional cash in Estonia. Taxing virtual income requires converting the purchase price, sales price, or income received into euros at the current exchange rate for the virtual currency on the date of receipt.
So if a person earns income through cryptocurrency purchases and sales online, or from the exchange of cryptocurrency for other currencies, that individual is required to declare that income. In the case of an exchange, income is the difference between the price of a received property and the price of the virtual currency that an individual bought and sold.
The only transactions required to be declared are those that generated income!
MINING
In the case of a private individual who independently mines cryptocurrency and doesn’t pay income tax, his income must then be declared as business income and taxes paid.
Furthermore, an individual mining virtual currency continuously must register as a sole proprietor with the Business register. A sole proprietor is able to deduct expenses related to their business from their income when he or she is registered as a sole proprietor.
A business’ net income must be taxed, paid to social security, and contributed to a mandatory funded pension.
RENTING OUT THE CLOUD STORAGE CAPACITY
Rental income must be declared when a person rents out storage space on their computer. It is required by the government to declare cryptocurrency mining and renting out storage capacity as a business activity.
VIRTUAL SALARY
Prior to making employee payments, all employers in Estonia who pay salaries in virtual currency must convert them into euros and pay labour taxes.
Upon receiving a virtual currency service fee from a foreign employer, for example, for which income tax has not been withheld, the person must convert such income into euros at the current market price at the time of receipt of the cryptocurrency, and then declare it as business income. “Virtual currency can be used by employers to pay for various goods and services without generating additional tax obligations if taxes have already been withheld on the wages.” — Tax and Customs Board of Estonia.
VAT
VAT is not charged when exchanging virtual currency for traditional payment methods. A person who deals with cryptocurrency will not need a VAT number since he will not need to register one.
Accounting services for crypto companies are provided by LKS Consult OĂś.[/vc_column_text][/vc_column][/vc_row][vc_row][vc_column][us_btn label=”SEND A REQUEST” link=”url:https%3A%2F%2Fwww.estonia-company.ee%2Fcontacts%2F|||” align=”center” css=”%7B%22default%22%3A%7B%22margin-top%22%3A%2220px%22%7D%7D”][/vc_column][/vc_row]
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.
Investing in cryptocurrency in Estonia is common by 
So far, digital currency-based funds are the best solution for investors who have no experience with crypto assets but want to make a profit.
President Nayib Bukele of El Salvador has promised to make Bitcoin the official currency of the country. If Parliament approves this plan, El Salvador will be the first state in the world to give a cryptocurrency a similar status.
