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 legal team supports with end-to-end setup of blockchain and crypto company structures with a full range of support services, including licensing.
Crypto License in Estonia: Crypto Exchange & Wallet Licenses
There are 2 official crypto licenses in Estonia:
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. 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 license covers services where the private wallet keys are created or held, while the funds belong to the user and not to the service provider.
Both crypto licenses are issued by the Estonian Financial Intelligence Unit (FIU) and can be applied for separately or together. Our legal team assists in applying for both the cryptocurrency exchange and wallet service crypto licenses in Estonia by preparing all required legal compliance documentation and managing the process on your behalf. The procedures to set up the company and obtain the license(s) can mostly be carried out remotely, about 30-60 days can be considered for the setup according to current legislation.
Key points for Cryptocurrency Company structure
In order to successfully set up the cryptocurrency exchange and/or wallet crypto service license in Estonia a limited liability company has to first be set up in Estonia. This process can be carried out remotely with no visit required, it usually takes about 5 business days for the registry to process. Thereafter we connect the crypto license application to the Estonian limited company. However, there are no specific reporting and/or accounting requirements that would be different from managing a regular entity, only inquiries from the FIU may be made periodically about the activities of the company, especially in regards to following the predefined AML/KYC policies. We provide full on-going support, including certified accounting and legal compliance support.
Even though it is theoretically possible to apply for the license(s) with a foreign corporate entity then in practice an Estonian company should be set up. Furthermore, we recommend using private person shareholder(s) structure rather than corporate shareholder(s) for the Estonian entity, because the latter complicates the setup, e.g. in case of corporate shareholder(s) the FIU may request non-criminal record extract also for the corporate shareholder, which may prove to be impossible to obtain in some jurisdictions (especially for offshore entities). Our legal team is available to consult in this matter according to the specific case, please contact us for further information. The key points are as following:
- 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 director/management board member. Foreign residents are allowed, no restrictions to citizenship or residence. Can be same as shareholder.
- No secretary nor local physical office required for the setup (only local registered office and registered agent – we hold the license to provide these services).
- 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 apply for a 14% rate (for legal entities).
The bank account is not required for the company formation and license application phase. Hence it can be addressed after the company and licenses are active, which is mostly the requirement also from the banks before approach. We work with several traditional banks and fintech payment service providers to ensure the opening of a business bank account for your Estonian crypto licensed 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 less than a month.
It is important to note that currently Estonian banks may prove to be very difficult to work with regarding 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, which also means that the licenses have to be active before the approach for full compliance. 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 entered into force in November 2017. We 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 a remote setup we will require the following documentation:
- Valid copy of passport
- Power of Attorney (PoA)
- Description of planned business model and CV’s from 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.
* Note regarding the non-criminal record extract: in order to successfully process the crypto license(s) in Estonia it is required to present to the FIU the non-criminal records extract (confirmed with an apostille) for all participants. Further, the regulator FIU has the right to invite the Compliance Officer for a face to face meeting in Estonia before granting the license(s) with the objective to confirm that the person is qualified and is familiar with the necessary AML/KYC procedures before granting the license(s). § 70. (3)-8 of the AML law states the following:
- where a member of its management body, procurator, beneficial owner or owner is a foreign national or where the undertaking is a foreign service provider, a certificate of the criminal records database or an equal document issued by a competent judicial or administrative body of its country of origin, which certifies the absence of a penalty for an offence against the authority of the state or a money laundering offence or another wilfully committed criminal offence and has been issued no more than three months ago and has been authenticated by a notary or certified in accordance with an equivalent procedure and legalised or certified with a certificate replacing legalisation (apostille), unless otherwise provided by an international agreement.
The non-criminal extract has to clearly state that you have no criminal records. It is your responsibility to obtain such an official document and forward the apostille certified original to us (we present it to the FIU). For most countries we can provide the appropriate sample. Please also note that the law requires that the certificate covers the whole country, e.g. in case of United States all states have to be covered, not only your home state. We support in finding the best option for any particular 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.