In the year 2017 Money Laundering and Terrorist Prevention Act was introduced. This law specified legislative challenges to the concept of “virtual value” and introduced measures on regulation of cryptocurrency stock markets and exchanges. In addition this law allowed to operate with turnover (trading, investment and exchange) of crypto currency values on a legal basis with the license.
Based on this law, companies providing service to customers on the transfer and storage, exchange and circulation of virtual values, such as cryptocurrency must obtain a special license issued by the Estonian Financial Supervisory Authority.
There are two types of license to obtain:
- Providing a virtual currency wallet service
- Providing services of exchanging a virtual currency against a fiat currency
It is possible to obtain two licenses, for each of which a separate application is filled out.
The procedure for obtaining a license
In order to obtain a license, it is first necessary to establish internal company rules, develop KYC/AML policies, and analyse the risks associated with both the customers and the service provider’s activities. These rules must comply with the prescribed directive of the Law on Money Laundering and Terrorist Financing, both from the point of view of European legislation and the Estonian Financial Inspectorate.
Once the documents are prepared and agreed with the customer, an application is submitted to the Financial Inspectorate. The period for reviewing the application is up to 120 calendar days from the date of submission. In some cases, it may be extended. A license fee of 10,000 euros is due upon submission. BBCTallinn will assist you in obtaining these licenses for your company.
Steps to obtain a cryptocurrency licence in Estonia
Founding a company
The first step is to set up a company in Estonia. To do this, you must register with the Estonian Business Register and obtain a registered address in Estonia.
One of the requirements for obtaining a cryptocurrency licence in Estonia is that the company must have a dedicated address. This means that the company must have a physical address in Estonia where it can conduct its business and receive mail.
The next step is to ensure that the company has a minimum share capital:
- 100 000 EUR for virtual currency exchange services, where virtual currencies are exchanged for money, other virtual currencies or vice versa
- 250 000 EUR for virtual currency transfer services, where the transactions are partly or entirely carried out electronically through a virtual currency provider
KYC (Know Your Customer) and AML (Anti-Money Laundering) are crucial components of the application process for cryptocurrency licences in Estonia. The aim of these regulations is to ensure that virtual currency providers operate with the highest level of transparency, accountability and security and prevent money laundering and terrorist financing.
As part of the application process, virtual currency providers must have internal AML/CFT (counter terrorist financing) procedures in place to identify, monitor and report suspicious transactions to the Financial Intelligence Unit (FIU). This includes identifying and verifying the identity of customers, monitoring transactions and conducting due diligence on high-risk customers.
It is important for virtual currency providers to have robust and effective KYC/AML policies and procedures in place to ensure compliance with Estonian regulations and to protect their customers from fraudulent activities. Failure to comply with KYC/AML requirements may result in penalties and revocation of the licence.
To obtain a cryptocurrency licence in Estonia, the company’s board of directors must be resident in Estonia. In addition, all board members must have a higher education and have the necessary skills and experience to successfully run the company. In addition, the board members and shareholders must have an impeccable business reputation and a clean criminal record.
These personnel requirements ensure that the company is run by qualified individuals with a track record of success and integrity, which is essential for building trust with clients and regulators.
The business plan should outline the company’s goals and strategies for success in the cryptocurrency industry. It should also include a market analysis describing the current state of the industry, potential competitors and target customers. In addition, the plan should outline the company’s marketing strategy and identify the methods that will be used to promote the business and attract customers.
The financial forecast should include a detailed projection of the company’s income and expenditure for the next 1-3 years. This should include revenue projections, expenditure estimates and cash flow projections. The forecast should also include a breakdown of revenue sources, such as fees for services, commissions from transactions and other sources of income.
Internal and external auditor
Another important requirement for obtaining a cryptocurrency licence in Estonia is the appointment of an internal and external auditor for the company. The internal auditor is responsible for monitoring and evaluating the company’s internal control systems, financial reporting and compliance with relevant laws and regulations. The external auditor, on the other hand, is an independent professional who reviews and issues an opinion on the company’s financial statements and reports.
The internal and external auditors must be qualified and independent individuals or firms who are not directly involved in the day-to-day operations of the company. They must comply with the relevant regulations and standards, such as the International Standards on Auditing and the Estonian Auditing Act.
By appointing an internal and external auditor, the company demonstrates its commitment to maintaining high standards of financial management and transparency. This also helps to ensure that the company’s financial statements are reliable, accurate and free of material errors, which is crucial for building trust with customers and stakeholders.
Accounting is a crucial aspect of any business, including cryptocurrency service providers. To comply with Estonian regulations and maintain the integrity of financial records, proper accounting practises must be followed. It is important that all financial transactions related to the virtual currency business are recorded accurately and in a timely manner.
Providers of cryptocurrency services in Estonia are required to keep accounting records that comply with the Estonian Accounting Act. This includes keeping records of all transactions, financial statements and other relevant documents. It is also important to ensure that the accounting system used is reliable and secure.
In order to meet the requirements for obtaining a cryptocurrency licence in Estonia, the company must have sufficient own funds. The company must be able to prove to the authorities that it has sufficient funds to carry out its activities in the foreseeable future.
This means that the company must have a strong financial position and sufficient liquidity. The company’s financial statements must be in order and up to date, and the company must have a clear plan for generating revenue in the future.
In addition, the company’s accountant must conduct monthly audits to ensure that the company continues to have sufficient equity to meet licensing requirements. If the accountant identifies any problems or concerns, the company’s management team must address them promptly.
It is important to note that failure to comply with the capital adequacy requirements can result in the revocation of the company’s cryptocurrency licence, which can have serious consequences for the company’s operations and reputation. Therefore, it is crucial for companies seeking a cryptocurrency licence in Estonia to manage their finances carefully and maintain a strong financial position.
The FIU reviews the application and conducts due diligence on the company and its employees. The review process takes up to 120 days.
Granting of the licence
If the FIU approves the application, the company receives a cryptocurrency licence that allows it to operate legally in Estonia.
At BBCTallinn, we have years of experience in helping our clients with the complex process of obtaining a cryptocurrency licence in Estonia. From preparing the necessary documents to meeting regulatory requirements, our team of experts can guide you every step of the way. We understand the importance of compliance and will work with you to ensure that all requirements are met to the highest standard. Contact us today to learn more about how we can help you obtain your cryptocurrency licence in Estonia.
|Type of service||Price|
|Preparation of the documents for the license||10 000€|
|State fee (tax not applicable)||10 000€|
|Dedicated legal address (per month)||from 350€|
|Legal support (per hour)||180€|
|Recruitment assistance||Depending on position|
All prices are stated without local VAT 20%, which will be applied according to Directive 2006/112/EC, if the recipient of the service is physical persona, Estonian or EU legal entity, without a valid VAT number
Join BBCTallinn and let’s take your business to new heights