Companies doing business with cryptocurrency starting from 2018 are able to apply for two types of licenses in Estonia:
1. Virtual currency exchange against fiat currency
Under this specific license company is authorized to provide services of exchanging a virtual currency against fiat currencies, back to fiat or between virtual currencies (spot transactions).
2. Virtual currency wallet service provider
This type of license allows to create or maintain clients' encrypted keys that can be used to store or transfer virtual currency, i.e. to provide wallet services. The main purpose for virtual currency wallets is to protect the currency and the fact that it is not safe nor reasonable to keep them in currency exchange environment.
General information about the licenses
Licenses are issued by Financial Intelligence Unit which is one of the independent bodies operating under Estonian Police and Border Guard Board. Buying and selling virtual currencies is a subject to money laundering prevention regulations - article 70 (1); 4) and article 71 of the Money Laundering and Terrorist Financing Prevention Act (MLTFPA) which stipulates that in order to offer the service of exchange of virtual currency and the service of a virtual currency wallet, an appropriate authorization must be granted from the Financial Intelligence Unit. The company with one or both licenses is qualified as a Financial Institution, however there are no special reporting requirements to the tax authorities. Accounting and administration of the company is done like any other company. GATE TO BALTICS will provide you with FIU guidelines on how to follow up requirements set up during licensing procedure. More detailed information on authorisation for economic activity you can find on official FIU website. Also, the main acts that regulate economic activity you can see here.
Requirements and process to obtain cryptocurrency license
Documents presented to FIU:
- Certificate of the register of convictions (Criminal record) for all involved persons - shareholders, members of the board, ultimate beneficial owners, responsible persons. Previous criminal conviction may be one of the reasons why FIU declines to grant the license to the company.
- Copies of personal identification documents of all involved persons.
- Rules of procedure. Internal document of the company which states how company will follow KYC (Know your customer) regulations which are set out in MLTFPA. GATE TO BALTICS prepares rules of regulations based on each company's planned business activities.
- CV's of involved persons. This is not an initial requirement from FIU, however in most of the cases CV is asked as an additional document, therefore we recommend to provide it from the beginning.
- Description of planned business activities. Summary of company's business plan where company illustrates to FIU main points of planned business activities.
All documents must be apostilled and in English.
- Application for license must be submitted by Estonian company or a branch of foreign company registered in Estonia. GATE TO BALTICS recommends to our customers to create a new company in Estonia, because our experience shows that the process of new company incorporation is much faster than establishing a branch of a foreign entity.
- Once the Estonian company is registered and all documents are in order, GATE TO BALTICS will prepare license application and submit it to the FIU. We will cover the state fee of EUR 345,00 on behalf of the applicant.
- During the process of application review, GATE TO BALTICS will be the main contact person with FIU and shall communicate directly with FIU on customer's behalf.
- Timescale of cryptocurrency license process can be divided in two parts:
- 1) company registration in Estonia; We usually recommend to our customers that at least one of the people from management board applies for e-Residency. The main benefits of e-Residency we have described in here. Company registration with e-Residency takes up to 3 business days. If for some reason it is not possible to apply for e-residency, then without it, we are able to incorporate a company within 2 weeks.
- 2) licensing procedure. After company is incorporated and all documents are collected, then GATE TO BALTICS submits license to FIU. Pursuant to Article 71 of the MLTFPA, the FIU reviews the authorisation application no later than within 30 working days following the date of submission of the application. FIU holds the rights to request additional information during the process of review.
Aspects which might cause refusal of the license:
- Previous criminal record.
- Complex corporate structure. In situations when more foreign entities are involved in a company structure, it is harder to provide transparency of the structure to FIU and it may result in denying to grant the license to the company.
- "Low-tax" jurisdiction involvement in the company structure. Even though, it is not illegal, it makes company structure less transparent. Also, in most offshore jurisdictions it is not possible to obtain Certificate from register of convictions which shows that company has a clear history. Please note that it is not the same as Certificate of Good Standing.
- Unclear business description plan. Company in question must have a clear business description plan to illustrate that there is a reason why it needs one or both of the licenses.
Bank Account opening for cryptocurrency company
It is no secret that companies who are in business with anything "crypto" related will face harder KYC procedures during bank account opening. At he moment (August, 2018), Estonian banks do not open bank accounts for companies which are dealing with cryptocurrency exchange or cryptocurrency wallet services. However, we do have a positive history with opening accounts in banks and payment service providers in other EU countries. Each case of bank account opening is different, therefore we are not able to give 100% guarantee to the customer that account will be opened as it depends on banks KYC process and customers' cooperation during it. As long as company's structure is transparent, UBO has a clear track record and company has a good business description plan, there shouldn't be problems to open account in EU.
Our experience shows that cryptocurrency companies which are licensed in Estonia has much higher chances in opening bank accounts than the ones without the license. Licensed company illustrates that it must follow certain Rules of procedure set out by government of Estonia as well as that government of Estonia has already done background check of the company and has approved it's business model. Even though, it does not minimize the responsibility of the financial institution where company opens a bank account, it provides impression that company is "clear" and comes from reputable EU jurisdiction.
As a company which is in the business of corporate and management services since 2001, we respect our customers and we operate in good faith - which means - no hidden fees.
All prices are listed in EUR currency and are VAT excluded
- Virtual currency exchange license - EUR 5000,00
- Virtual currency wallet service provider license - EUR 5000,00
- Both licenses when applied together - EUR 7000,00
Please note that in ALL PACKAGES price for company incorporation is already included. In situations, when customer already has incorporated Estonian company, we shall deduct "company formation" cost according to our pricelist. Just like we stated above - no hidden fees.
To stay ahead of news with regards to cryptocurrency company development in Estonia, we recommend you to follow our newest articles in our website as well as on all our social media channels.
Contact us if you would like to receive information with regards to more specific items, such as:
- Initial Coin Offering;
- White Paper in Estonia;
- Taxation of cryptocurrency companies in Estonia (hint - in most cases just like regular / normal sales companies);
- Cryptocurrency investment funds in Estonia;
- Security tokens;
- Utility tokens;