Crypto Licensing in Estonia

Estonia stands out as an inviting destination for diverse virtual currency endeavors, earning its reputation as a “cryptocurrency haven” due to its forward-thinking legislation. Pioneering as the first EU country to regulate cryptocurrency companies, Estonia has witnessed a surge in interest over the past five years. Entrepreneurs, exchanges, and exchangers have established physical offices, with over 2,000 businesses securing cryptocurrency licenses.

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    Benefits of Obtaining a Crypto License in Estonia

    • Legitimization of cryptocurrency activities within a secure legal framework.
    • Registration costs that are notably lower compared to the US, Switzerland, and the UK.
    • A favorable tax policy.
    • Estonia’s leadership in digitalization and IT.
    • Efficient processing, taking only 2-3 months from application to license issuance.
    • Equal protection and regulation, placing crypto entities on par with traditional financial institutions.
    • Enhanced customer confidence fostered by Estonia’s esteemed reputation in the cryptocurrency market.
    • A well-established banking system.
    • Ongoing assistance and support from regulatory authorities.
    • Varieties of Crypto Licenses in Estonia

    Types of cryptocurrency licenses in Estonia 

    Under the recent amendments to the Anti-Money Laundering and Counter-Terrorist Financing Act, crypto businesses, both operational and those seeking licenses, must furnish the regulator with required documentation, establish a physical office, and appoint local management. The Virtual Asset Service Provider license, issued by the Estonian Financial Intelligence Unit (FIU), consolidates various license types into one umbrella term. It encompasses:

    1. Crypto Exchange: Facilitating the exchange of digital currency into FIAT or vice versa, along with cryptocurrency-to-cryptocurrency exchanges for a fee.
    1. Crypto Wallet and Custodial Services: Managing cold and online wallets for secure cryptocurrency storage, including the creation and storage of encrypted client keys.

    Main Requirements for Obtaining a Crypto License in Estonia

    • Corporate account with an Estonian bank or a European Payment Institution authorized to operate in Estonia.
    • Minimum share capital of €12,000 for an Estonian VASP company.
    • Physical office presence in Estonia with necessary equipment.
    • At least one board member residing in and actively participating in the company’s activities in Estonia.
    • Good standing for all major company stakeholders, evidenced by certificates of no criminal record in their country of citizenship.
    • Implementation and adherence to AML/KYC policies, risk control, and monitoring rules.
    • Maintenance and secure storage of client data accessible to regulators when required.
    • Regular collection of KYC (customer due diligence) data from clients.
    • Directors and AML officers possessing relevant education, skills, and experience in cryptocurrency activities.

    Process of Obtaining Estonia Cryptocurrency License (VASP authorization)

    Step 1 – Company Registration (2-3 Weeks)

    Upon initiating the process, the company undergoes a swift registration that encompasses the assignment of a local director and the opening of a corporate account, all achieved within 2-3 weeks.

    Documents required for this step:

    • Obtain an up-to-date passport scan from the country of residence.
    • Provide a brief 1-2 A4 page description of the company’s business model.
    • Specify the preferred company name.
    • Approval of budgets and project scope in alignment with the initial workshop.
    • Power of Attorney (PoA) and outlines subsequent steps.

    Company Formation process:

    • Upon receiving hard copies of the documents in the Estonian office, a sworn translation to Estonian is conducted.
    • Facilitate a notary deal and initiate the company’s entry into the commercial register within 5 days.
    • Prepare the set of corporate documents.
    • Open the corporate account and transfer the share capital.

    Step 2 – Pre-Licensing (2-3 Weeks)

    This phase ensures the company’s compliance with Estonian VASP requirements and involves drafting the AML/KYC policy while preparing the necessary legal, financial, and IT documents.

    Pre-licensing process:

    • Outline the company structure.
    • Assemble compliance documentation (AML/KYC/KYT).
    • Develop a business plan, financial documentation, and forecasts.
    • Describe the technical solutions employed.
    • Establish internal control procedures.
    • Initiate relationships with partners and employees.
    • Hire an AML Officer and other necessary employees.
    • Secure premises and conclude rental agreements.
    • Forge preliminary agreements with partners (liquidity providers, KYC/KYT solutions, custody solutions, etc.).
    • Conduct staff training.

    STEP 3 – Licensing (2-3 Months)

    This critical phase results in the company obtaining a VASP license, indicating readiness to provide virtual currency services.

    Licensing process:

    • Submit the license application.
    • Prepare the application and gather additional documentation as required by the regulator.
    • Establish contact with the regulator.
    • Receive support throughout the licensing process.
    • Engage in negotiations with the regulator.
    • Clarify the business model and established policies.
    • Amend documents and provide additional information.

    Step 4 – Post licensing support (Optional)

    This optional stage completes all necessary arrangements, ensuring the VASP license holder is fully operational. It includes:

    • Notarized corporate documents for account opening.
    • Internal control services.
    • An experienced crypto field accountant.
    • Assistance with customer complaints.
    • Audit of AML/KYC procedures.
    • Periodic employee training.
    • Representation during regulator supervision.
    • Preparation of legal opinions.

    Additional Services Related to Obtaining Crypto License in Estonia (VASP authorization)

    1. Establishment of organizational structure – assistance identifying the appropriate legal structure, incorporation of holding companies in tax efficient jurisdictions, transferring companies shares, designing ownership structure, etc.;
    2. Tax advisory – guidance and advice regarding tax obligations and liabilities, minimizing tax liabilities from cross-border activities, creating a tax planning strategy, etc.;
    3. Preparation of internal documentation – preparation of tailor made AML / CTF Policy with Annexes, Terms & Conditions, Privacy Policy, Cyber Security Policy, etc.;
    4. Assistance in hiring employees – guidance and support to employers who are looking to hire new staff. Such service includes potential employees background / knowledge check, interviewing, establishment of employment policies and procedures, etc.;
    5. Assistance in creating partnerships – support and advisory in various potential partnerships and collaborations with other entities in terms of additional services (e. g., IT, KYC, banking service providers) or additional financing (e. g., organizing meetings with VC, agnel investors, preparation of pitch deck, etc.);
    6. Legal support in other crypto related projects – assistance in token offering legal support (ICO/STO/IEO), private placement rounds, preparation of legal opinions, analysis of business models, etc.

    For more please see our Services page.

    Summary of Crypto license in Estonia 

    Project time frames 6 to 8 months
    State fee for application € 10,000
    Required share capital € 250,000
    Corporate income tax 0% on reinvested profits. 20% on withdrawn profits
    Annual supervision fee 2% of the total transaction volume per year
    Local staff member Local Director, Local AML Officer, Local Internal Auditor, Local External Auditor
    Physical office Required
    Accounting audit Required
    Bank account options European EMIs, specialized credit institutions