Starting a Crypto Exchange Company in Estonia
Single Virtual Currency Service Provider License
Businesses that trade in virtual currencies can apply for a license, which grants the permission to be:
- Provider of a service to exchange a virtual currency for a fiat currency.
It allows the exchange of fiat to cryptocurrencies, cryptocurrencies to fiat, and cryptocurrencies to cryptocurrencies. - Provider of a wallet service for virtual currencies.
This is a service that generates keys for customers or holds encrypted keys from customers that can be used to hold, store and transfer virtual currencies.
The operating licence is issued by the Estonian Financial Intelligence Unit (FIU), which is an independent structural unit of the Estonian Police and Border Guard Board. The main laws governing this activity can be found here.
The crypto-exchange company in Estonia qualifies as Financial Institution but has no special reporting requirements to the tax authorities. The accounts must be kept as for any other Estonian company. No special reporting to the supervisory authority is required, but the FIU may at any time impose requirements and make inquiries about the company's activities.
During the procedure, the FIU has the right to request additional information and explanations about the proposed activity. The license will be issued if all required information is deemed sufficient and all conditions are met.
Any change after obtaining the license (address, owners, directors, UBOs, compliance officers, etc.) requires registration of changes with the FIU (license issuing authority) with complete documentation.
Requirements
- Criminal records of all related persons from all countries of citizenship.
- Passport copies of all related persons from all countries of citizenship.
- CVs of all related persons of the company.
- Share capital minimum €12 000 - Contribution must be made before the application is submitted.
- Physical presence in Estonia (Working office).
- Management board in Estonia. Management board member(s) and compliance officer must hold Estonian residency within the meaning of the Income Tax Act and have good business reputation.
- Compliance officer must permanently work in Estonia and must prove impeccable business reputation, i.e. provide supporting documents regarding education, skills and reputation.
- Existing bank account / PSP account in an EEA country which is providing cross-border services in Estonia or which provider has established a branch in Estonia.
- Provision of full list of payment accounts kept in the name of the company, along with each payment account’s unique number and the account manager’s name.
- KYC/AML procedure rules and activity description prepared in accordance with Estonian laws.
Fees
The state fee is €3300. Application is reviewed within 60 working days with the FIU’s right to extend it for another 60 days if necessary.
Operating Costs
We provide a full package deal on a monthly basis in order to comply with the requirements of Estonian authorities.
Ready and furnished office in Tallinn, including secretary services and phone answering - from €600 (excl. VAT) per month.
Experienced AML officer - from €2500 (excl. employment taxes) per month.
Experienced board member - from €2500 (excl. employment taxes) per month.
License Obtaining Process
Application for the crypto license must be made through a company registered in Estonia or through a registered branch of a foreign company in Estonia. As a rule, we recommend using a local company rather than a branch, as the registration of a branch is clearly more complicated.
If a local company is registered and all requirements are met, we pay the state fee of 3300 EUR and apply for the license.
While applying for the license, we also help with ongoing matters, as the authorities often have additional questions or need some clarifications.
Additional Transparency Requirements
In the case of a foreign corporate shareholder, the FIU requires the criminal record of the foreign company and all persons associated with this legal entity. It must also attach the list of UBOs of the relevant company to the foreign register extract.
So, using a foreign company in your structure complicates the process significantly. We recommend that you avoid using foreign shareholders.
FIU Meeting Request
The FIU has a new policy regarding the licensing process, both for new applications and amendments to existing licenses.
The FIU may invite the FIU contact/compliance officer (responsible person) to attend a face-to-face meeting before the license is granted. The aim is to confirm that the responsible person is familiar with AML procedures, relevant Estonian laws and obligations to notify the FIU in case of suspicion of money laundering or terrorist financing.
If the FIU contact person or compliance officer is not involved in the structure of the company (on the board of directors or as a shareholder), the FIU would like to see a clear employment relationship between him or her and the company. The inability to meet this requirement was one reason for a negative decision by the FIU.
In case of a request for a meeting, the client has 60 days to travel to Estonia and meet the FIU. The minutes and the approval decision are both issued after the meeting. If the client cannot come to Estonia within the given time, the FIU automatically closes the case and issues a negative decision.
The meeting lasts approximately 2 hours and is held in Estonian, so a translator is requested to accompany the client. We can provide an experienced translator for a fee of €225 per meeting.
Timeframe
Registration of the company
Once we have received all the initial information from you, it usually takes about 1-2 days to set up the company.
Registration for the virtual currency services licence
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 work and apply for the crypto licence.
The process of application
An application for an activity licence is processed by Financial Intelligence Unit (FIU) by granting or denying the activity licence within 60 working days from the date of submission of the application.
Bank Account for Crypto Company
Opening the bank account for companies doing business in the crypto / financial industry is one of the most complicated issues. We’ve built a great payment system that can work with such companies and we highly recommend to use it in order not to have any issues in the middle of working process. The payment fees are quite affordable and the service itself is reliable and has most of modern features for comfortable daily work.
Taxation of Estonian Crypto Company
The taxation of virtual currency transactions depends on the nature of the transaction. There is no direct taxation when the token is sold or bought like a security or investment or other currency.
Regular sales
Sales are counted as normal/regular even if payments are received for goods and services in virtual currencies. For accounting purposes, the value of the transaction must be in EUR and the rules of VAT apply as for a normal/regular transaction.
Payments for goods or services in virtual currency do not release you from compliance with VAT rules. If VAT is applied to payments in FIAT currency, it should also be applied to payments in virtual currency. VAT must be submitted in EUR and VAT must be paid/returned in EUR.
Contact Us for Establishing your Crypto Business in Estonia
AlphaLAW team will find the most favorable and profitable solution for your crypto and fintech business, saving you time and money. We have our own payment system which is seems to be the best solution (reliable and afforadble) for opening an account for businesses operating at high risk.
Specialists from AlphaLAW will be happy to assist you in obtaining a cryptocurrency license in Estonia. Based on the needs of our clients from all over the world, we have developed an all-inclusive offer in form of special package which includes the registration of an Estonian company and all the necessary services to obtain a crypto license in Estonia.
Our services include (but not limited to):
- Preparing, Collecting and Drafting of the necessary documents.
- Drafting the procedural and KYC rules of a company.
- Translation of documents into Estonian/English and assistance throughout the process of obtaining the license.
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.