The Baltic countries were among the first to adopt blockchain technology and offer licenses for cryptocurrencies. While this is not the first nor the only jurisdiction to offer crypto licenses, they stand out for their simple licensing environment. Since the country is part of the European Union, licenses allow you to open companies in the field of cryptocurrencies in other European countries without acquiring auxiliary permits.
Compared to other similar licenses such as Singapore and Swiss, the European one costs half the price and can be issued in less than 6 weeks compared to 3-6 months. Europe is fast becoming a leading digital and IT jurisdiction due to attractive financial legislation that has made the cryptocurrency licensing process simple and straightforward. In order to obtain a license for a cryptocurrency or other activity, it is better to use crypto legal services like LegalBison. Firstly, it is much faster, and secondly, it is safer. Make the right choice, save your money and time.
Economic freedom of the cryptocurrency sphere in Europe
Estonia is one of the ten countries with a free economy. The country has sustainable economic prosperity, highly effective and secure financial sector supervision agencies, and foreign residents have access to rights similar to those of the citizens of the country.
Estonia had one of the highest corporate tax rates in the European Union – 20%. Recently, a reduced rate of 14% has been applied to those companies whose income subject to taxation does not exceed income in the last 3 years. An additional plus is that income reinvested in the company is not taxable. But the only taxes levied on crypto exchanges are when ICO dividends are distributed to shareholders.
Basic cryptocurrency licenses
Estonia has enacted a new cryptocurrency exchange license through the Money Laundering and Terrorist Financing Prevention Act (MLTFPA) within the Financial Intelligence Unit (FIU). Crypto licenses in Estonia are arguably the most demanded in Europe due to government regulations that allow the industry to flourish. The program was launched in November 2017 and introduced the following types of licenses for cryptocurrencies:
Cryptocurrency exchange: exchange of cryptocurrency by providers offering the service of converting fiat to cryptocurrency and vice versa;
Crypto wallet: storing funds in cryptocurrency.
The licenses are issued by the Estonian Financial Intelligence Unit (FIU). An individual application must be submitted for the issuance of each type.
The registered legal entity falls under the classification of a financial institution, which obliges it to maintain accounting records without special reporting. But the FIU has the right to request data on the activities of legal entities at any time.
Estonia grants the right to register a crypto company remotely through a representative. The FIU reserves the right to request a face-to-face audience with the owner of a legal entity in Estonia.
Registration of a cryptocurrency organization
Before issuing licenses, it is necessary to register a legal entity dealing with cryptocurrency. Estonia puts forward minimum administrative requirements for registered legal entities for the implementation of financial actions with cryptocurrency, a legal entity must be provided with a bank account with an authorized capital stored on it in the amount of 12,000 euros. This amount will not be frozen and will be used free of charge after crediting to the corporate account;
the minimum staff of a registered legal entity must include:
- 1 shareholder;
- 1 local board member;
- 1 local government liaison officer.
Registration of the company takes 3 days and is performed in 3 steps:
- After checking the availability of the name of the legal entity, the owner submits an application for state registration and pays a fee (145-190 euros, based on the required processing speed). If the authorized capital exceeds 25,000 euros, it must be deposited with the bank;
- The owner is registered for VAT through the tax and customs authorities. The process takes 2-3 days;
- The owner registers hired employees through the employment register. The state registration procedure can be carried out simultaneously with the registration of the VAT register.
Licensing process
After completing the registration of a company in the field of cryptocurrencies, the owner has the right to apply for licenses for cryptocurrency transactions through the FIU, which informs about the decision in a month. The deadline can be extended by two or four weeks if the FIU staff requests a meeting.
Along with the application, you must provide:
- contacts of the applicant company – phone, e-mail, website address;
- information of service providers;
- information of shareholders / members of management;
- information of the legal representative of the legal entity – full name, date and place of birth, contact information;
- a document developed in accordance with the legal requirements of Estonia, regulating the rules of a legal entity in the field of financial procedures related to cryptocurrency, and containing the basic data of the employee responsible for monitoring the implementation of the rules;
- documents confirming the non-criminal history of all interested persons and employees.
In rare cases, government agencies have the right to require the presence of supporting documents and conditions:
- CV of the entire staff;
- Having a local office run by an Estonian citizen;
- Business plan;
- Financial projections for the first year;
- Procedural rules of the company;
- AML Policy.
The whole process, including the registration of a legal entity, can take a maximum of 1.5 months, after which the owner of the company receives one of the most tax-attractive cryptocurrency licenses.
