We will help you with establishing a cryptocurrency company in Estonia.
If you intend to deal with cryptocurrencies in Estonia, there are two types of licenses you need to apply for. One is for providers of the service of virtual-fiat currency exchanges (including crypto-crypto, crypto-fiat or fiat-crypto). The other license is for a virtual currency wallet service provider. If you intend to operate in both areas, you need to submit two separate applications, and receive two separate licenses.
Licenses are issued by the Estonian Financial Intelligence Unit, or FIU, which is part of the Estonian Police and Border Guard Board. Your company will not have to do any special reporting to the regulator or tax authorities, but you will be subject to any inquiries they deem reasonable. Note that a license once granted can be revoked if the supervisor’s precepts are not complied with, or if operation has not started within 6 months of granting the license.
FIU can also refuse to grant a license, which has happened 4 times so far in 2018 among our customers. The reasons for refusal are not providing a criminal record for all persons associated with the company, related persons with a criminal record, or related persons who are USA citizens. It is difficult to obtain US criminal records which comply with the requirements of FIU.
To make the first steps, you need to present the necessary documents, which are “Certificate of the register of convictions”, or a criminal record, of all persons associated with your company – that includes all shareholders, beneficiary owners, responsible person, board members). Also, all the persons mentioned above need to present passport copies. It is advisable to be prepared with CVs of those same persons and to have a description of intended activities ready, in case they are asked for additionally. Officials will also ask for criminal records of all persons associated with corporate shareholders, if any. So, we advise not to include such shareholders in your company, to make things faster and easier.
To receive a license for cryptocurrency operations, you need to be an Estonia-registered company, or a registered Estonian branch of a foreign company. The second option is far more time-consuming.
What needs to be done first is create the company that will apply for the license(s). GCE has ready-made companies, new and clean, which can be transferred to your name quickly, or a new one can be created for a day or two. You will make things easier if you visit Estonia for at least one day, and in that period your company will be transferred. If you would like things done without a visit, it takes about 2-3 weeks and some additional costs.
After the creation and transfer of the company, GCE will take over and do the application process and answer any inquiries from authorities. The FIU has 30 working days to process your application and either grant a license or refuse it.
For the moment, opening a bank account can be a problem as Estonian banks do no open accounts for cryptocurrency companies. But Estonia-based companies are allowed to have foreign bank accounts, so this possibility is usually explored and tried out.
As for taxation, that depends on the nature of the operation. If a transaction is made to purchase goods/ services, you owe VAT. If the transaction is in the form of security or investment, you are not directly taxed.
You should be aware of the difference between security tokens and utility tokens. Utility tokens promise no monetary profits or claims, only access to services/ use of products, systems or platforms. If you will be issuing only utility tokens, do not use the words investment/ investor in you white paper, as it is considered a misleading commercial practice. You also need to check whether the Investment Funds Act is applicable to your case.
According to the Estonian Financial Supervisory Authority, sometimes coins and tokens may qualify as securities. In that case, the regulations and the licenses required are different. GCE is ready, in case you have doubts, to do a preliminary or full legal analysis at a reasonable cost.