Company in Estonia
 

Starting a cryptocurrency company in Estonia

with exchange and wallet service provider licenses

In 2018 we have obtained more than 70 crypto licenses with 100% success rate

 

1. About licenses   |   2. Requirements   |   3. Timeframe  |   4. Opening bank account   |   5. Taxation   |   6. Token types   |   8. Ordering form

 
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Cryptocurrency exchange and wallet service provider licenses

Companies that deal with virtual currencies can apply for 2 different activity licences:


1. Providers of a service of exchanging a virtual currency against a fiat currency

It allows exchanging fiat to crypto, crypto to fiat, crypto to crypto.


2. Providers of a virtual currency wallet service
 

It allows providing virtual currency (hot and cold) wallet service in the framework of which the company generates keys for Clients or keeps Clients’ encrypted keys, which can be used for the purpose of keeping, storing and transferring virtual currencies.

This service means offering custodial services of credentials necessary to access virtual currencies


General information about the licenses mentioned above


The operating licences are issued by the Estonian Financial Intelligence Unit (FIU), which is an independent structural unit of the Estonian Police and Border Guard Board. Link
When applied together, two applications must be submitted and two different licenses are issued.
The main acts that regulate the activity can be found here.


The company is qualified as a Financial Institution, but has no special reporting requirements to tax authorities. Accounting must be done like for any other company. No special reporting to the regulator is needed, but FIU can always make precepts and inquiries about the company's activities. You may find Financial Intelligence Unit's advisory guidelines here.


§ 75.  Revocation of authorisation/license

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 will revoke authorization specified in subsection 1 of § 70 of this Act where:

  1.  the Financial Supervision Authority has granted authorisation to the undertaking;
  2.  the undertaking repeatedly fails to follow the precepts of the supervisory authority;
  3.  the undertaking has not commenced operation in the requested field of activity within six months from the issue of the authorisation.

 
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Requirements


Documents presented to officials

  • Certificate of the register of convictions (a.k.a. criminal record) for all related persons (shareholders, board members, ultimate beneficiary owners and responsible person)
  • Passport copies of all above mentioned persons

As a rule all documents must be in English (or Russian) and certified with an apostille. These documents may not be older than 3 month. It is also required to present rules of procedure for AML purposes. Usually this is prepared by KRM Advisor. Officials have the right to ask for additional information and they often ask:

  • CV-s of related persons
  • Description of planned activities

License obtaining process

To apply for the above mentioned license(s), it must be done via a company registered in Estonia or through a registered branch office of a foreign company in Estonia. As a rule, we suggest to use a local company not a branch office, as branch registration is clearly a more complicated task.

When a local company is registered and all required documents collected, we will pay the state fee of 345EUR and apply for the license(s).

During  the licence application process we also assist in current matters, as authorities often have additional questions or they need some clarifications.


 

Additional transparency requirement

In case of a corporate shareholder (of an Estonian cryptocurrency company), officials usually will ask for the criminal record of the shareholder company and ALL related persons to that company (shareholders and board members). This means that using a corporate shareholder in your structure might complicate things a lot. Therefore our suggestion is to avoid using corporate shareholders.

 

 
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Timeframe


Company registration

Once we have obtained all the initial information from you, it takes usually about 1-2 days to create the company.

In case you choose a ready-made company, it is already created and ready to be transferred to you.

To transfer a company to your name, you will need to visit Estonia for 1 day. During that day we transfer the company shares and board membership to you. Changes will be visible in the register in a few days (max 1 week).

In case you want to start a company remotely (without visiting Estonia) - it usually takes 2-3 weeks additional time and involves some additional costs.


Registration for virtual currency services license

After the company is registered and we have received from you all the required information and documents mentioned above, we can do the rest of the job and apply for the license.

The process of an application

An application for activity licence shall be processed by the Financial Intelligence Unit (FIU) by granting or refusing to grant the activity licence within 30 working days as of the date of submission of the application.

During the process FIU has the right to request additional information and explanations about the planned activity. License will be issued after all required information is considered sufficient and all of the conditions are fulfilled.


Real results of license registrations

Currently we have succeeded to get above mentioned licenses
registered in ca 2-3 weeks with a 100% success rate.

 
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Bank account opening for cryptocurrency companies


Clarity and transparency requirement

There are several options for a bank account opening. The KYC process related to cryptocurrency companies is more demanding, but otherwise accounts are opened if there is enough clarity and transparency. Currently, as a rule, Estonian banks do not open accounts for cryptocurrency companies.

Positive track record

We have already successfully opened some accounts for cryptocurrency companies in other EU banks. If everything is fine, then with high probability an account will be opened. However, we can't guarantee a positive result, as it depends on all details and how the client co-operates during the KYC process.


 
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Taxation of cryptocurrency transactions in Estonia


Taxation of virtual currency transactions depend on the nature of the transaction. There is no direct taxation if the token is sold or bought similar to security or investment or other currency. 

Regular sales

Sales are counted as normal/regular, even when payments for goods and services are received in virtual currencies. For accounting purposes the transaction must have the value in EUR and VAT rules apply as per usual/normal transaction. Payments for goods or services in the form of virtual currency does not free you from following VAT rules. If VAT is applied in FIAT currency payments, then it should be applied in virtual currency payments as well. VAT returns must be submitted in EUR and VAT will be paid/returned in EUR.

Read also Link
About corporate profit taxation in Estonia you can read here: Link

 
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Token types. White paper and Investment fund



Security tokens

The FSA stated that tokens

  1. Whose owners have a reasonable expectation of future cash flows (profit)
  2. Which guarantee certain other rights in the issuer
  3. Which are acquired for other purpose comparable to investing
  4. Whether the issued tokens are freely transferable and tradeable on the capital market (this criteria should be analysed if previous points are fulfilled)

are likely to qualify as financial instruments (i.e. security tokens).

Utility tokens

In accordance with the Financial Supervision Authority’s (the FSA) opinion, tokens that do not promise any profits or monetary claims and only provide an access to some platforms/systems/rights to use products or services, qualify as utility tokens.



Investment fund

The FSA provided that depending on the specific structure and objective of an ICO, the Investment Funds Act (IFA) may be applicable – for example if investors’ capital is raised in an ICO with the aim of further investing it in accordance with the determined investing policy for the benefit of the investors and in common interests.

Investment services are, for example, the following:

  • issue or sale of securities;
  • organizing an offer or issue of securities;
  • provision of investment advice;
  • reception and transmission of orders related to securities;
  • securities portfolio management.

White paper

If the company is going to issue only utility tokens, use of words like investor and investment in the WP is forbidden in accordance of the Advertising Act. Also, misleading commercial practices are forbidden in respect of consumers, therefore all promises must not be misleading.

In accordance with the Consumer Protection Act a commercial practice is deemed to be misleading if it contains false information or if presentation of factually correct information deceives or is likely to deceive the average consumer and in both cases as a result of it the average consumer makes or is likely to make a transactional decision that the consumer would not have made otherwise.

Therefore, we recommend replacing phrases like “banking feature”, “banking service” etc with more neutral expressions, because banking is regulated area in Estonian and is subject to authorization and supervision of the FSA.


 
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Ordering forms


Order company formation with license registration

Order license(s) for already existing company

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