Cryptocurrency Exchange & Wallet Licenses in Estonia
Estonia has a clear and favourable legal and tax environment for cryptocurrency exchange and crypto wallet services provider companies (e.g. 0% corporate income tax). This small European Union country of just 1.3m people is regarded as one of the world’s most advanced digital nations, it is a widely recognised alternative to jurisdictions like Malta, Gibraltar or Switzerland, only with lower costs and simpler administration. We support with end-to-end setup of blockchain and crypto company structures with a full range of support services, including licensing.
We can obtain 2 official crypto licenses in Estonia:
Providers of a service of exchanging a virtual (crypto) currency against a fiat currency
Official activity license covering services for exchanging fiat to crypto, crypto to fiat and crypto to crypto
Providers of a virtual (crypto) currency wallet service
Official activity license to provide crypto wallet service. Wallets are digital offline (cold wallet) and online tools (hot wallet) based on public-key cryptography used to securely send and receive virtual (crypto) currencies. This license covers both and enables to offer custodial services of credentials necessary to access crypto currencies.
Both crypto activity licenses are issued by the Estonian Financial Intelligence Unit (FIU) and can be applied for separately or together. Our legal team assists in obtaining both the cryptocurrency exchange and wallet service licenses by preparing all required legal compliance documentation and managing the process on your behalf. The full procedure to set up the company and obtain the license(s) can be carried out remotely with no visit required, it is safe to consider 30 days for completion of the full setup.
Key points for Cryptocurrency Company structure
In order to successfully set up the cryptocurrency exchange and/or wallet service license an Estonian limited liability company has to be set up. This process can be carried out remotely with no visit required, it usually takes about 5 business days for the registry to process. The Estonian entity is a regular private limited company which after the license approval will be regarded as a financial institution. However, there are no specific reporting and/or accounting requirements that would be different from managing a regular entity, only inquiries from the FIU may be made periodically about the activities of the company, especially in regards to following the predefined AML/KYC policies. We provide full on-going support, including certified accounting and legal compliance support.
Even though it is theoretically possible to apply for the license(s) with a foreign corporate entity then in practice an Estonian company should be set up. Furthermore, we recommend using private person shareholder(s) structure rather than corporate shareholder(s) for the Estonian entity, because the latter complicates the setup, e.g. in case of corporate shareholder(s) the FIU may request non-criminal record extract also for the corporate shareholder, which may prove to be impossible to obtain in some jurisdictions (especially for offshore entities). Our legal team is available to consult in this matter according to the specific case, please contact us for further information. The key points are as following:
- At least 1 shareholder (private person or corporate entity). No restrictions to citizenship or residence. For optimal setup structure please consult our legal team.
- At least 1 director/management board member. Foreign residents are allowed, no restrictions to citizenship or residence. Can be same as shareholder.
- No secretary nor local physical office required (only local registered office and registered agent – we hold the license to provide these services).
- Beneficial owners’ details are disclosed to the authorities.
Legal framework and requirements
The legal framework is governed by the Money Laundering and Terrorist Financing Prevention Act (link) which entered into force in November 2017. We prepare all policy documentation according to the legal framework and manage the process with the FIU on basis of a Power of Attorney (PoA).
For a remote setup we will require the following documentation:
- Valid copy of passport
- Power of Attorney (PoA)
- Description of planned business model and CV’s from all participants
- Website address where services will be offered
- Certificate of non-criminal record from the registry of convictions (not older than 3 months) for shareholder(s), board member(s), ultimate beneficiary owner(s) and authorized person *
All listed documentation has to be notarized by notary public and confirmed with an apostille, in English (or notarized English translation). In the first stage we will gather all information and provide step by step process overview according to your case.
* Note regarding the non-criminal record extract: in order to successfully process the crypto license(s) it is required to present to the FIU the non-criminal records extract (confirmed with an apostille) for all participants. § 70. (3)-8 of the AML law states the following:
- where a member of its management body, procurator, beneficial owner or owner is a foreign national or where the undertaking is a foreign service provider, a certificate of the criminal records database or an equal document issued by a competent judicial or administrative body of its country of origin, which certifies the absence of a penalty for an offence against the authority of the state or a money laundering offence or another wilfully committed criminal offence and has been issued no more than three months ago and has been authenticated by a notary or certified in accordance with an equivalent procedure and legalised or certified with a certificate replacing legalisation (apostille), unless otherwise provided by an international agreement.
The non-criminal extract has to clearly state that you have no criminal records. It is your responsibility to obtain such an official document and forward the apostille certified original to us (we present it to the FIU). For most countries we can provide the appropriate sample. Please also note that the law requires that the certificate covers the whole country, e.g. in case of United States all states have to be covered, not only your home state. We support in finding the best option for any particular case.
Our legal compliance team will prepare the full documentation for the company to meet with the Anti Money Laundering (AML) and Know Your Customer (KYC) criteria established in the legal framework. Some parts of this include, for example:
- assessment and management of the risk of money laundering and terrorist financing;
- collection and keeping of records;
- performance of the notification obligation and notification of the management;
- internal control rules for checking adherence thereto.
- describing transactions of a lower risk level and establishing the appropriate requirements and procedure for carrying out such transactions;
- describing transactions of a higher risk level, including risks arising from means of communication, computer network and other technological development, and establishing the appropriate requirements and procedures for carrying out and monitoring such transactions;
- set out the rules of taking the due diligence measures;
- set out the requirements and procedure for keeping the documents and records;
- set out the requirements and procedure for application;
- a politically exposed person;
- a person whose place of residence or seat is in a country where no sufficient measures for prevention of money laundering and terrorist financing have been taken;
- a person with regard to whose activities there is prior suspicion that the person may be involved in money laundering or terrorist financing;
- a person with regard to whom international sanctions are imposed;
- a person with whom a transaction is carried out using telecommunications.
The Estonian Money Laundering and Terrorist Financing Prevention Act sets forward cases in which the crypto license can be revoked. Mainly, § 75. Revocation of authorisation instructs as following: in addition to the grounds provided for in subsection 1 of § 37 of the General Part of the Economic Activities Code Act, the Financial Intelligence Unit (FIU) will revoke authorisation specified in subsection 1 of § 70 of this Act where:
- the Financial Supervision Authority has granted authorisation to the undertaking;
- the undertaking repeatedly fails to follow the precepts of the supervisory authority;
- the undertaking has not commenced operation in the requested field of activity within six months from the issue of the authorisation.
Professional fees and further information
We will provide a step by step overview with detailed timeframes and cost break-down after gathering the preliminary information. Our track-record in obtaining the crypto licenses for our clients is 100% as we follow a thorough checklist to confirm that all legal requirements are met.
The end-to-end setup cost for the crypto license depends on the specific case and structure, for example depending on the number of participants involved. In most cases our professional fee remains in the range of 6000 euros including all legal and government fees, there are no hidden fees. Please contact our legal department through the contact form below and we will get back to you with further information.