Why Cryptocurrencies are so Popular in Estonia

In 2011, Republic of Estonia, a country in the north of Europe, was the poorest country in the Eurozone. The country had just joined the Eurozone in 2011 and its people were struggling to boost economic development. Ten years later, Estonia is a booming economy that is on top of the world for one important reason: cryptocurrencies and crypto-assets.

With free lightning fast wireless internet on almost every street, a friendly business environment, low taxes, and a progressive community, any startup would love to incorporate their fintech or crypto business in this country. Business registration in Estonia is much less time-consuming than in most all other countries in the whole world. The e-residency registration program, which takes about 2 hours to complete, ensures that a startup meets tax, AML and banking regulations and can be incorporated effortlessly.

Although the Estonian government only embraced the concept of cryptocurrencies in early 2017, it's not overly taxed cryptocurrency startups. Bitcoin and Ethereum are also not subject to VAT tax. Digital assets are classified as property for tax purposes, and only cryptocurrency exchanges and storage are regulated. This means that cryptocurrency mining companies popping up in the country are hardly regulated.

8 important and unique features of the Estonian business environment

• Incorporation and registration of company is done online for residents of Estonia and the whole registration process takes less than an hour to complete;
• It costs less than €5,000 to establish a limited liability company (OÜ);
• Share capital for crypto-exchange and storage company is only €12,000;
• Investors from all parts of the world are welcome;
• Hardly regulated ICOs and investments in cryptocurrencies;
• No limit on the size of cryptocurrency investments;
• Possibility to establish an Alternative Investment Fund (including Crypto Fund);
• Convenient tax system.

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Estonia's tolerance and love for ICOs

ICO, the high-risk crowdfunding model common among blockchain startups, isn't as heavily regulated in Estonia either. In fact, the Estonian government announced in late 2017 that it planned to launch a state-backed ICO. Called "Estcoin", the idea was to develop a separate Estonian token to promote the country's e-residency program. To clarify, e-residency is a program that allows investors from all over the world to start a business in Estonia without having to enter the country.

There are many cryptocurrency and fintech startups that have registered and conducted an ICO in Estonia.

Economic and legal framework for fintech companies

Estonia's legal framework is designed to attract investors from around the world. The e-residency program is the most attractive feature for fintech startups and investors. With the ability to start a business online and obtain a crypto license in Estonia with help of AlphaLAW company, small blockchain startups have found a new business base.

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However, Estonia is increasingly paying more attention to cryptocurrency startups, especially those planning an ICO. In November 2017, the country's government clarified the business clause that helped prevent money laundering to ensure that ICOs are regulated in the country.

Cooperation with Estonian authorities

One of the challenges crypto (blockchain) and fintech startups face is direct opposition from legal actors. Startups love Estonia because the country's regulators such as Rahapesu Andmebüroo and others are accessible and work easily with founders. As long as a company abides by the country's rules, Estonian authorities are quick to help them start a fintech / crypto business in the country.

In most cases, founders have few opportunities to communicate with the authorities in person. Most of the regulations that need to be followed can be done online. Coherent cooperation with the government of a country is very important for crypto (blockchain) and fintech startups as it helps them to start a business with peace of mind.

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Estonian Tax Policy

Estonia has one of the most competitive tax policies in the European Union. The tax policy particularly favors investments in cryptocurrencies as they are not subject to VAT tax. If a startup wants to be incorporated in Estonia, it only has to pay the normal operational costs. ICOs are also not subject to VAT and income tax, which makes the country one of the best and most convenient locations to launch an ICO.

Operational costs of fintech company in Estonia

The low cost of starting and operating crypto (blockchain) and fintech businesses in Estonia is one of the many reasons startups seek to incorporate in Estonia.

Thanks to the low cost of running a business in Estonia, many companies prefer to operate in this country compared to other countries. China, for example, has been the country of choice for many startups. But in the last six months, the Chinese government has cracked down on cryptocurrency mining and trading companies, exchanges, and virtually every startup related to ICO.

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Conclusion

Although many countries around the world are loosening their stance on cryptocurrencies, few of them have matched Estonia's openness to accepting cryptocurrency-related businesses and fintech startups. The Estonian government often reiterates its willingness to welcome any company willing to follow the country's rules and regulations, which means that more crypto (blockchain) and fintech companies will continue to try to set up their precense in this European country.

Contact Us and Apply for a Crypto License in Estonia

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.