Estonia has a clear and favourable legal and tax environment for cryptocurrency exchange and crypto wallet services provider companies (e.g. 0% corporate income tax). This small European Union country of just 1.3m people is regarded as one of the world’s most advanced digital nations, it is a widely recognised alternative to jurisdictions like Malta, Gibraltar or Switzerland, only with lower costs and simpler administration. Our on-site legal team at the Estonian head office supports with end-to-end setup of blockchain and crypto company structures with a full range of support services, including licensing and on-going compliance.
Crypto License in Estonia: Crypto Exchange & Wallet Licenses
The Estonian Crypto License “providers of a virtual currency service” is an umbrella license that covers the following activities:
Providers of a service of exchanging a virtual (crypto) currency against a fiat currency
Official activity license covering services for exchanging fiat to crypto and crypto to fiat and crypto to crypto. When offering such transactions as a service for commission, it becomes an exchange service. Furthermore, most ICO oriented companies will benefit from this license for legal compliance.
Providers of a virtual (crypto) currency wallet service
Wallets are digital offline (cold wallet) and online tools (hot wallet) based on public-key cryptography used to securely send and receive crypto currencies. The virtual currency wallet service means a service in the framework of which keys are generated for customers or customers’ encrypted keys are kept, which can be used for the purpose of keeping, storing and transferring virtual currencies.
The umbrella crypto license covers various activities, e.g. exchange and wallet services and the company has to define its scope of activities itself. The crypto license is issued by the Estonian Financial Intelligence Unit (FIU). Our legal team assists in applying for the crypto license in Estonia for providing crypto exchange and/or wallet services by preparing all required legal compliance documentation and managing the process on your behalf. The regulator application review time is up to 2 months (can be extended up to 4 months).
The information on this page has been updated on March 10ᵗʰ 2020 to take into account new AML law regulations in Estonia. For further information about new regulations please refer to: https://www.maxcorp.eu/eng/knowledge-center/estonian-aml-law-amendment-crypto-2020/
Key points for Cryptocurrency Company structure
In order to set up the Estonian crypto license to provide cryptocurrency exchange and/or wallet services a limited liability company has to first be set up in Estonia. The company has to have a bank account in European Economic Area and there is a 12.000 euros share capital requirement that has to be paid with monetary payment. These initial setup procedures can mostly be carried out remotely with no visit required, it usually takes about 5 business days for the registry to process.
Starting from March 2020 several new requirements were introduced in the new AML law amendment. Mainly the license applicant will need to comply with the regulators local substance requirements such as on-site office, local Estonian resident management board member(s) and AML compliance officer personnel. Subject to project review we may be able to provide full on-going support, including certified accounting and legal compliance and substance support.
The company has to keep a full and up-to-date overview of all clients and transactions according to the AML/KYC regulations. The regulator FIU may make enquiries about the activities of the company, especially in regards to following the predefined AML/KYC policies. Further, the regulator may visit the on-site office in Estonia, monitor the work process and conduct interviews with the personnel. Our legal team is available to consult in this matter according to the specific case, please contact us for further information.
- At least 1 shareholder (private person or corporate entity). No restrictions to citizenship or residence. For optimal setup structure please consult our legal team.
- At least 1 management board member who is Estonian resident and located in Estonia. Needs to be part of business activities. Additional management board member(s) foreign residents are allowed, no restrictions to citizenship or residence.
- Estonian resident AML compliance officer requirement. Please contact us for further information.
- Local on-site office with substance needed. Please contact us for further information.
- Beneficial owners’ details are disclosed to the authorities.
- Virtual currencies (e.g. Bitcoin and altcoins) exchange services are not subject to VAT.
- Services invoiced (e.g. sales invoices) in virtual currencies are subject to regular VAT rules.
- Corporate profits are not taxed (CIT=0%) until the profits are distributed (as dividends).
- Income tax 20% is charged on gross dividends (calculated as 20/80 of the net dividend). Special conditions may apply for a 14% rate (for legal entities).
The bank account is not required for the company formation, but it is required for the license application phase. We work with several traditional and fintech banks to ensure the opening of a business bank account for your Estonian company. We do our best to support in the process, but can not provide a guarantee and the end-result will depend on your business model, background and co-operation during the KYC process. Still, most of our clients have been able to open an operational account in a week.
It is important to note that currently Estonian banks may prove to be very difficult to work with regarding non-residents and especially crypto companies, but we suggest alternative banking options in Europe. Please also note that for crypto companies higher level of AML/KYC principles are applied. We can support with appropriate banking solution consideration after we have full overview of the planned activities and financial forecasts to consider the best path forward.
Company formation in Estonia is simple as our legal team takes care of all documentation for the full setup. We also have availability for Estonian shelf companies with older registration dates and active VAT registrations. We can provide you with a turnkey solution with all the support services. The most time and cost efficient approach to register a company in Estonia is to purchase a new shelf company, because the founding process can be a challenge to non-residents due to various hidden requirements (e.g. share capital payment). In most cases, non-residents opt for a new tailor-made shelf company to avoid bureaucracy as we have already taken care of all requirements. However, we do assist with new incorporations on request. We will help you to choose the best approach according to your objectives. For more information refer to the Company Formation in Estonia page »
Legal Framework and Requirements
The legal framework is governed by the Money Laundering and Terrorist Financing Prevention Act (link) which first entered into force March 2020. We can prepare all policy documentation according to the legal framework and manage the process with the FIU on basis of a Power of Attorney (PoA).
For preparing the license application we will require the following documentation:
- Valid copy of passport from each country of citizenship
- Power of Attorney (PoA)
- Detailed description of planned business model and financial forecast
- Education diploma(s), proof of good reputation and CV’s for all participants
- Website address where services will be offered
- Certificate of non-criminal record from the registry of convictions (not older than 3 months) for shareholder(s), board member(s), ultimate beneficiary owner(s) and compliance officer *
All listed documentation has to be notarized by notary public and confirmed with an apostille, in English (or notarized English translation). In the first stage we will gather all information and provide step by step process overview according to your case.
Our legal compliance team will prepare the full internal procedures documentation for the company to meet with the Anti Money Laundering (AML) and Know Your Customer (KYC) criteria established in the legal framework. Some parts of this include, for example:
- assessment and management of the risk of money laundering and terrorist financing;
- collection and keeping of records;
- performance of the notification obligation and notification of the management;
- internal control rules for checking adherence thereto.
- describing transactions of a lower risk level and establishing the appropriate requirements and procedure for carrying out such transactions;
- describing transactions of a higher risk level, including risks arising from means of communication, computer network and other technological development, and establishing the appropriate requirements and procedures for carrying out and monitoring such transactions;
- set out the rules of taking the due diligence measures;
- set out the requirements and procedure for keeping the documents and records;
- set out the requirements and procedure for application;
- a politically exposed person;
- a person whose place of residence or seat is in a country where no sufficient measures for prevention of money laundering and terrorist financing have been taken;
- a person with regard to whose activities there is prior suspicion that the person may be involved in money laundering or terrorist financing;
- a person with regard to whom international sanctions are imposed;
- a person with whom a transaction is carried out using telecommunications.
The Estonian Money Laundering and Terrorist Financing Prevention Act sets forward the requirements for the Compliance Officer (CO). Mainly, § 17 instructs as following:
The duties of a Compliance Officer (CO) include, inter alia:
- organisation of the collection and analysis of information referring to unusual transactions or transactions or circumstances suspected of money laundering or terrorist financing, which have become evident in the activities of the obliged entity;
- reporting to the FIU in the event of suspicion of money laundering or terrorist financing;
- periodic submission of written statements on compliance with the requirements to the management board of a credit institution or financial institution or to the director of the branch of a foreign credit institution or financial institution registered in the Estonian commercial register;
- performance of other duties and obligations related to compliance with the requirements.
The requirements set by the FIU for a Compliance Officer (CO) include:
- only a person who has the education, professional suitability, the abilities, personal qualities, experience and impeccable reputation required for performance of the duties of a CO may be appointed as a CO. The appointment of a CO is coordinated with the FIU;
- The FIU has the right to receive information from a CO or CO candidate, their employer and state databases for the purpose of verifying the suitability of the CO or CO candidate. Where, as a result of the check carried out by the FIU, it becomes evident that the person’s reliability is under suspicion due to their past acts or omissions, the person’s reputation cannot be considered impeccable and the obliged entity may extraordinarily terminate the CO’s employment contract due to the loss of confidence.
The Estonian Money Laundering and Terrorist Financing Prevention Act sets forward cases in which the crypto license can be revoked. Mainly, § 75. Revocation of authorisation instructs as following: in addition to the grounds provided for in subsection 1 of § 37 of the General Part of the Economic Activities Code Act, the Financial Intelligence Unit (FIU) will revoke authorisation specified in subsection 1 of § 70 of this Act where:
- the Financial Supervision Authority has granted authorisation to the undertaking;
- the undertaking repeatedly fails to follow the precepts of the supervisory authority;
- the undertaking has not commenced operation in the requested field of activity within six months from the issue of the authorisation.
Professional fees and further information
We will provide a step by step overview with detailed timeframes and cost break-down after gathering the preliminary information. Our track-record in obtaining the crypto licenses for our clients with no criminal history is 100% as we follow a thorough checklist to confirm that all legal requirements are met.
The end-to-end setup cost for the crypto license depends on the specific case and structure, for example depending on the number of participants involved. In most cases our professional fee remains in the range of 5000 euros excluding associated government and state fees, there are no hidden fees. Please contact our legal department through the contact form below and we will get back to you with further information.
Why MAXCORP? It’s simple, certified professionals deliver results.
Our local team of lawyers specializes in blockchain and crypto structures - we are a member of the Estonian Crypto Association. We support with turn-key solutions for ICOs, crypto licensing, legal compliance and a wide range of corporate services.
MAXCORP is a certified service provider and holds a FIU license. We provide the best price to quality ratio with no hidden fees.