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Acquiring an Estonian Cryptocurrency Exchange License

 Estonian Cryptocurrency Exchange

Why Estonia?

There are a few reasons to opt for Estonia as a destination to register your cryptocurrency License.

Cost : Estonia offers one of the most cost effective solution. As a comparison, the UK, Singapore, Japan or the USA are 3 to 4 times more expensive.

Timing : Registration of the company and license takes in average about 45 days. Other countries listed above would take anything between 3 to 8 months in average.

Legislation: Licenses are issued by the Estonian Financial Intelligence Unit (FIU), which is an independent unit of the Estonian Police and Border Guard Board. The FIU is internationally well regarded as a regulatory body.

E-Residence & Reputation: Estonia is open to entrepreneurs from all over the world and is recognized as one of the most developed countries in terms of digitalization and IT. an Entrepreneur intending to do business in Estonia may apply for an e-residece card that allows access to all government services and simplifies communication with state authorities.

Taxes : There is no profit tax in Estonia. Read further below of additional details.

Licences

There are two types of cryptocurrency license activity that can be applied for in Estonia.
The first one, is to be a provider to exchange virtual currency to fiat currency and vice-versa.
The second one is to be a provider of virtual currency wallet service.

Both licenses have the same legal, operational and tax framework.
The operating licenses are issued by the Estonian Financial Intelligence Unit (FIU). An application for such license shall be processed by the FIU within 30 working days as of the date of submission of the application. If applied together, two applications should be submitted, and two different licenses will be issued.

The initial step on securing a future as a successful cryptocurrency exchange is to seek licensure.

What are the Legal Requirements?

Kindly note that the company will be registered with an authorized capital equivalent to EUR 2500, however there is no requirement for this capital to be paid up during the registration process of the company and the company may issue symbolically only 1 EUR of contribution. However, the amount of 2500 euros will represent the liability of the company’s shareholders and must be paid to the company in the following two cases:

  1. 1. In case of insolvency/bankruptcy of the company, the shareholders are liable with their own capital and this liability is limited to the amount of 2500 euros.
  2. 2. If the shareholders decide to distribute the dividends of the company then they are obliged to invest the authorized capital into the company bank account.

We suggest to register a Limited Liability Company for Exchange and E-Wallet licenses, which can be founded by only one person, who may simultaneously be the shareholder/director/AML officer. (We recommend appointing an AML officer from our end for language reasons as the AML Bureau of the Estonian police is communicating only in Estonian language and this person will be acting as an intermediary only).

  • All company shareholders may also act in a capacity of board member
  • The person responsible for the anti-money-laundering measures is to monitor client activity. These measures also include understanding indicators that are suspicious and may denote terrorist activity. Should this happen, this person must report the matter to the Estonian authorities.

Taxation and Accounting Matters

Limited Liability Companies are not eligible for VAT (Value Added Tax) on their financial services. Registered companies pay a 0% tax rate in their income. There are, however, several other taxes about which you should be aware of:

  • Since 2019, the tax system has changed and it was reduced to the benefit of the shareholders of a company in Estonia:
  • The tax on dividends introduced as follows : 1/3 of gross amount of the payout will be taxed at a rate of 14% and 2/3 at a rate of 20%.
  • A 33% social tax on personal income**.
  • A 7% personal income tax will apply if you are a shareholder of an Estonian company, even if you are not a resident in Estonia which was recently introduced in the beginning of 2019.

**Kindly note that if the company will start operating and hire employees locally in Estonia then it is a must to follow the regulation of resident companies inside the country.

Registered cryptocurrency exchange companies in Estonia can expect to pay around €100 per month for legally-required accounting services. Other costs include a €300 approximate charge per year for the legal address and company administration. This is notable as overheads are much cheaper for a cryptocurrency exchange provider than for electronic money services and asset management services or payment institution services.

Steps to Acquiring a License

Once you have ensured you have the correct capital and the company is established to the guidelines, there are several steps and requirements to follow. We can help you achieve this; the details are set out below on what you need to do or what we require from you to proceed with each stage.

Setting up the Company

Here, we will require you to notarize a power of attorney to one of our authorized specialists. You can compile this in your native language and we will organize the translation into Estonian which is a legally required step. Then we can incorporate a company in Estonia and open the corporate bank account to begin trading. We will need the following from you to set up the company: a scanned copy of your passport. If you are married, we will also need your marriage certificate as full disclosure of dependents is required here. This is for checking in case shares are sold to another party. Contact details for the company founders including legal place of residence and email address, and telephone numbers – landlines and cellphones, and any social media contact such as Skype and FB Messenger. Details on the company name, website, and office hours contact details. Further, we will also require a statement on the nature of the business.

Only when the registration is complete can we proceed to obtaining the license.

Applying for a License

The Estonian regulator issues the cryptocurrency exchange license upon receipt of the following information:

  • Phone number, email address and website of the company registered in Estonia. Also required are the contact details of shareholders, and people responsible for delivering the services of the named company. Further, they will require the same contact details of the company’s legal representative and information details of internal control of the company
  • Details confirming that the shareholders and members of the board have no convictions issued from the country of residence
  • It is a legal requirement that the company adheres to rules and procedures when handling cryptocurrencies. A person most be nominated as responsible for such compliance and Estonia requires that this person is named

Interested? kindly fill in the form below and we shall get in touch with a proposal.

 

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