The establishment of Estonia’s Money Laundering and Terrorist Financing Prevention Act (MLTFPA) in 2017 had introduced two brand new licences for businesses specialising in the trade and exchange of cryptocurrencies. In less than a year of declaring the MLTFPA, more than 800 cryptocurrency licences have been issued. As Europe’s pioneer for such regulations, Estonia has entrenched itself as an optimal location for cryptocurrency service licensing.
Estonia’s addition into the Eurozone, its adoption of the coveted euro, and its recent receptiveness towards cryptocurrency trade have made it one of the most affluent countries in the Eastern European region. Low taxes, coupled with a friendly, liberal business culture and a complimentary wifi network makes the country an attractive target for cryptocurrency startups.
Types of Cryptocurrency Licences in Estonia
The two Estonian cryptocurrency licences are intended for different crypto-related purposes: the first provides licences to businesses that exchange digital currencies into fiat money whereas the other administers a licence that affords the licensee to operate cryptocurrency wallet services. The former encapsulates three types of transactions – cryptocurrency to cryptocurrency; fiat money to cryptocurrency; and cryptocurrency to fiat money. The latter, on the other hand, authorises companies in offering virtual token wallets or e-wallets.
Estonia’s openness towards cryptocurrency further allows cryptocurrency enterprises not involved in the abovementioned activities, such as mining, to operate in Estonia without a license.
Advantages of Licensing with Estonia
Estonia’s value as a cryptocurrency business licenser lies in the pace and security which it accords to businesses. Accompanying its candid taxation schemes and exemptions is a transparent, rapid and forthright Estonian commercial licence application process that does not deter investors and businesses. Genuine businesses are viewed favourably by regulatory authorities and are rewarded by an abbreviated application process (see other benefits of Estonian licences in infographic below). A successful licensee will be entitled to a conducive environment for Initial Coin Offerings (ICO) and will be free of tax liabilities on all capital gains.
To further illustrate Estonia’s support for startups and businesses, there is also an established e-residency registration programme which ensures that a company is compliant with the nation’s regulations on tax and banking. This programme requires a mere 30 minutes to complete, and significantly simplifies and shortens a company’s licence application process.
Applying for an Estonian Cryptocurrency Licence
The licensee will first indicate their interest by applying for a cryptocurrency licence with the country’s Financial Supervisory Authority of the Financial Intelligence Unit (FIU) through a company registered in Estonia, or a foreign company with a branch in Estonia, allowing for remote licence application. The FIU will then be entitled to 90 days to respond to the application
Upon license approval, the Financial Intelligence requires a 2,500 EUR paid-in capital and a physical office operating locally. There must also be at least one shareholder, one board member and three council members. Licensed companies must also strictly adhere to the demands explicated by the MLTFPA and must start their operations within six months of licence approval.
DesFran has significant knowledge on licence application with esteemed regulatory authorities around the globe like, UK’s Financial Conduct Authority and the Australian Securities & Investment Commission. Tap on DesFran’s expertise in financial licensing needs today by contacting us here
About the Author
Kevin Tan is Head of Strategic Communications and Research at DesFran, and oversees research and communications across the company’s headquarters in Singapore, and overseas desks in China, Hong Kong and the UK. Kevin has 17 years of experience in the civil service covering leadership, strategic communications, and operations portfolios. Kevin holds a Bachelor’s Degree in Business (Information Technology) with Honours, and a Master’s Degree in Mass Communication from Nanyang Technological University.
Joyce Sun is Strategic Communications and Research Intern at DesFran. Joyce enjoys learning as she writes financial news blurbs and editorials involving financial regulatory developments due to her keen interest in equities and finance-related topics. She is a final year honours student at the National University of Singapore hoping to pursue a career in the finance industry, and to continue developing her knowledge on investments.
Joey Tan is Strategic Communications and Research Manager at DesFran. Joey has a flair for creatives and is always keen on improving and upgrading herself within the realm of the financial services industry. She manages the strategic communications and marketing initiatives in DesFran and has a keen interest in financial licensing and regulations. Joey is a sociology graduate from the University of Buffalo.