What Is the Regulation of Cryptocurrency in Estonia

What Is the Regulation of Cryptocurrency in Estonia?

Estonia became one of the first countries in the EU, which began to introduce the first steps in regulating the crypto industry. Initially, it introduced very loose regulations, but gradually, it raised more burdensome regulations. Today, to open a business using Estonia cryptocurrency, you need to meet specific requirements. Today we want to tell you how to get a work permit here and what rules you should comply with.

Licensing Features

In Estonia, types of cryptocurrency businesses need to be licensed. To date, the crypto license is called an “importer of virtual funds.”

A company that has received such a crypto license has the right to engage in the following activities:

  1. Currency exchange (crypto – fiat; fiat – crypto; crypto -crypto);
  2. Store cryptocurrencies on behalf of clients;
  3. Perform cryptocurrency transfers between storages (wallets).

Such a license is issued by one of the financial intelligence units (FIU).

Once a company has become licensed, it will be classified as a Financial Institution (FI). It is worth noting that the firm will not have any other requirements related to reports to the tax office. And accounting will be no different from any other ordinary Estonian company. No additional documents need to be submitted to the regulatory authorities. However, the FIU may request the provision of all data on crypto transactions and record keeping at any time.

Before starting the licensing process, you must choose a business line and register as a legal entity in Estonia. It is also necessary to prepare documentation for registration and have an authorized capital of at least 12,000 euros (preferably as fiat funds, in some cases, a digital option is allowed but agreed upon with the regulator). Then you can already send an application for a crypto license.

AML Policy

Now considers the list of requirements regarding the AML policy (obstruction of illegal financial transfers):

  1. Give the company a unique name and get a registration number.
  2. The legal address is the actual location of the office in Estonia (a virtual office will not work).
  3. Provide all addresses: main office, branches (if any), and company contact numbers.
  4. Develop a business plan for the company for several years.
  5. Have a department (+ AML officer) within the company structure to counter the laundering of financial assets.
  6. Submit the personal details of the officer responsible for the AML policy (officer).
  7. To document the absence of a criminal record for all company employees.
  8. Company employees must have appropriate qualifications (diplomas of education and documentary evidence of work experience).
  9. Resume and documents on the education of the company’s executives (director, beneficiary, shareholders).
  10. Pay the state duty (3300 euros) and provide a receipt for payment.
  11. Open a bank account with a bank that can provide its services in Estonia.

But we must remember that some nuances still need to be considered when licensing. For example, a crypto license can only be issued to an Estonian legal entity, and the office’s physical location must be within the country.

To speed up the licensing process, it is better to create a website and issue an e-residency, allowing you to conduct company business remotely and conduct electronic correspondence with the country’s regulatory authorities.

Today, the registration period for a crypto license will be 4 months, and documents must be sent through a notary representative or on the website of the commercial register.

Cryptocurrency regulation and verification

The financial supervision of the country controls the local market of cryptocurrency activities. In this regard, all crypto companies must prove that they follow all AML rules. Otherwise, the organization may be deprived of a license.

The regulation of crypto activities includes control by the state authorities on whether the company complies with legislative acts. They can check the crypto exchange without warning (there is no systematic check); for example, they can ask for a list of concluded transactions with information about the client. The Estonian Finance Authority conducts inspections not only of licensed companies but also of applicants for licensing.

For the regulatory body to decide to check the company, there are several reasons:

  • not provided all the data to obtain a crypto license;
  • at least one report on the conducted crypto-transaction seemed suspicious;
  • the firm provided false information to any request from the regulator;
  • presence of claims from clients (poor quality of services, violation of the law);
  • the usual scheduled random check of crypto firms.

The primary purpose of checks is to detect illegal transactions. Also, the particular unit of the Estonian Police, which issues licenses, has the right to inspect such a plan.

There are also online checks. They are a requirement to provide various documents: a list of crypto transactions, customer data, employee data, the presence of an AML/KYC policy (including a staff member responsible for this), financial statements, a risk prediction program, and so on.

During an on-site inspection, the company must confirm that it operates only within the framework of the law, has a registered physical office in the country, familiarizes itself with the organization’s management body, and has a group of employees with an AML officer.

Inspectors have the right to see all the office premises, get acquainted with the equipment and equipment used, and the availability of software. During such inspections, inspection officers have the right to seize documents and equipment for review.

At the end of the audit, a protocol is drawn up, which everyone should familiarize themselves with. It is desirable for such verification the presence of a lawyer.

Benefits of cryptocurrency business in Estonia

Despite the tightening of measures and adjustment of legislation in the country, there are several advantages to starting a crypto business in Estonia:

  1. A stable reputation of a country with transparent legislation.
  2. The structure of laws is formed, so an entrepreneur needs to spend a minimum of effort to start a crypto business.
  3. This country is loyal to the activities of cryptocurrency companies, trying to create a good area for this.
  4. All crypto transactions are carried out within the framework of the law.
  5. Strict adherence to the AML policy gives a greater likelihood of doing business safely.
  6. Small costs for obtaining a license compared to other countries (registration of a company – 1800 euros and licensing – 5000 euros).
  7. Tax policy is acceptable: many virtual currencies (bitcoin, altcoin) are not subject to taxation (no VAT), and a zero rate is applied on retained earnings.
  8. Regulators actively support cooperation with crypto exchanges.
  9. Registration for e-residency provides many opportunities (access to online platforms, the possibility of electronic signatures, signing contracts online, and filing reports via the Internet). Thus, the bureaucratic block is eliminated, and time is saved.
  10. An Estonian crypto company can open bank accounts in many countries worldwide.
  11. At a high level, the development of IT technologies allows you to engage in the crypto business online.

Having received a crypto license in Estonia, your company will have the status of trust with other companies, thereby attracting other organizations to cooperate with your company.

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