How to Start Your Cryptocurrency Startup Company in Estonia

AlphaLAW, as a team of professionals, is convinced that cryptocurrencies and blockchain technology will shape the world of tomorrow. However, this is still a very new area that is sometimes viewed with suspicion by the traditional business and financial world. In this post, we would like to inform you about how to start your cryptocurrency startup company in Estonia and what are the benefits, requirements and issues involved.

The main problem with cryptocurrency startups

Despite the fact that Bitcoin, Ethereum and blockchain technology as a whole are becoming more mainstream and even appearing in the news on a regular basis, the topic is still obscure to the general public.

In general, as we can see on a regular basis from our experience, cryptocurrency and blockchain startups face a lack of knowledge from most of the population and a great deal of distrust from the traditional financial sector.

All this naturally leads to a lack of understanding on the part of the government and official institutions, as well as insufficient legal or internal frameworks that act defensively rather than trying to understand and regulate the technology and its possibilities.

However, the biggest obstacle that crypto companies have to overcome is undoubtedly opening a bank account. Banks have traditionally viewed cryptocurrencies and blockchain technology as high-risk related activities and prefer not to open account for companies involved in crypto business.

Why to consider Estonia?

Estonia is not only one of the friendliest countries in the world for crypto and blockchain companies, but also a respectable country of European Union. This means that your company is based in a respectable country in Europe and not in a shady tax haven like, for example, Gibraltar, Seychelles or Bermuda.

Estonia is not the only country that has implemented the e-Residency program, creating a digital nation that allows anyone to set up and run a European business entirely online. But it is most convenient and affordable to start your business in Estonia. The fact that you can set up and manage your business entirely online is also an important factor, especially for startups that are just getting started.

Finally, Estonia issues special single Virtual Currency Provider License (so called Crypto-License in Estonia) for your business to work with cryptocurrencies, switch between fiat and cryptocurrencies, or act as a wallet for your customers.

The only difficulties your business might face come from external entities - like banks - rather than the Estonian government and legislation.

Let us take a look at all the factors you need to consider before launching your cryptocurrency startup in Estonia.

Registering your company in Estonia

There are no other requirements for setting up a company to serve as the legal framework for a cryptocurrency startup in Estonia. The registration process is similar to other businesses. It is possible that the authorities may require more information about your company's operations, and the Estonian Financial Intelligence Unit (FIU) may require additional information and more paperwork, but AlphaLAW specialists will take care of that for you.

Crypto companies are required to prepare accounting, tax reports and VAT reports just like any other business. In fact, the Estonian Financial Unit (FIU) explicitly describes that a company working with cryptocurrencies is subject to accounting rules and taxes like any other company.

However, it is true that you will be subject to more regulations in certain aspects due to the specific nature of your business. Also, your accounting will obviously be much more difficult and will require an accountant who specializes in this area.

In addition, the Estonian Financial Intelligence Unit (FIU) may require regular reports on your activities. This includes bookkeeping, accounts, taxes and so on. As always, if you have nothing to hide and your activity is completely legal, this is just a purely bureaucratic procedure.

Bank account for crypto company in Estonia

The bank account is one of the biggest obstacles when it comes to opening your cryptocurrency or fintech startup in Estonia and elsewhere for that matter.

It might seem that the most simple way and best option would be one of the most popular fintech solutions for e-residents like Wise or Paysera. Or even ones that allow you to trade or manage cryptocurrencies, like Revolut Business.

Surprisingly, the opposite is true. The reason is that mentioned above fintech solutions are subject to much stricter controls and therefore have greater restrictions when it comes to the type of clients and businesses they can accept.

This means that if your startup lives in the cryptocurrency world, you will not be able to use above mentioned services to open your company's bank account, as we explain in this article.

Interestingly, some traditional banks that are considered natural enemies of the new digital currencies are also among those that could open a bank account for your business. However, it is not easy, the success rate is quite low and the fees are quite high.

It is important to be aware that it is currently impossible to 100% guarantee that a traditional bank will open a bank account for your business. You may even need to try some alternatives. As with anything else, this will take some work and patience.

If opening a traditional bank account is not possible, there is an alternative solution you can consider to start doing your crypto or fintech business.

Specially for the customers whose activities related to crypto, AlphaLAW has implemented a special banking solution and offers payment services for fintech businesses. Our solution is reliable and affordable, it is quite convenient for our customers for daily payment operations and offers your business a payment account with IBAN, SWIFT/BIC code. This includes receiving income from your clients, making payments and so on.

What documents do I need to open an account with payment solution from AlphaLAW?

For payment account opening you will need a number of documents in addition to your AML and KYC policy to open your account:

• Information about all shareholders and Board members of the company.
• Company registration certificate (extract from the register).
• Memorandum of association.

You can obtain all these documents online through the Estonian Business Registration Portal by simply identifying yourself with your e-resident card.

AlphaLAW team has the expertise and professionals to provide you with the necessary information to open payment account for your cryptocurrency or fintech business.

Single Crypto License in Estonia

In this article, we will talk about the single Virtual Currency license for crypto traders and crypto wallets issued by the Estonian government. With this license, your startup can trade between fiat money and cryptocurrencies or serve as a wallet for your users or customers.

What are the requirements? In general, Estonian authorities require the following:

• Criminal records of all members of the company (shareholders, board members, directors, etc.).
• Copies of passports of all members.
• The AML regulations (Anti-Money Laundering) and the KYC (Know Your Customer) document of your company.
• The CV of all members and a document or dossier detailing the company's activities.

These documents must be in English or Estonian. They must also have been issued less than three months ago. Finally, all documents to be submitted must be certified / apostilled.

It usually takes about 60 business days for the application to be reviewed. If no additional information is required, it is approved or rejected.

The application for a crypto license in Estonia is a complicated process that requires special regulation knowledges, a lot of documentation, and usually constant communication with the Estonian FIU unit. AlphaLAW team provides experts who can help ensure the success of your application.

The accounting for crypto company in Estonia

You must remember that your business must keep its accounts just like any other business. This means that you must have invoices for sales and purchases with the corresponding value in euros so that they can be added to the general ledger and included in your accounting.

So even if you accept payments in Ethereum or exchange dollars for Bitcoin, the invoices and fees you charge your customers should include the equivalent value in euros and all the usual accounting terms.

This may take some work, especially to carry bookkeeping and automate your invoicing process, but it's an investment in the future that will ensure your startup, while building the economy of the future, adheres to the strictest legalities in the present.

Conclusion

Thanks for your patience. In this article, we have talked about how to start your cryptocurrency startup company in Estonia.

The Republic of Estonia offers one of the friendliest frameworks for entrepreneurs and fintech startups working with cryptocurrencies or blockchain technology. However, there are some points you should consider, such as opening a bank account or obtaining the appropriate licenses. With good planning and the right documents, the odds are in your favor.

Specialists from AlphaLAW will be happy to help you obtaining a cryptocurrency license in Estonia. Our assistance includes the preparation of the list of required documents, help in developing company procedural rules, translation of documents into Estonian/English and support throughout the whole licensing process.

In case you have any questions or are interested in obtaining an Estonian license to exchange cryptocurrencies and other virtual assets for a fiat currency (crypto license in Estonia), please contact us through the following communication channels.