Estonian Cryptocurrency Exchange License

There are some specific reasons why Estonia is a preferred destination to register a cryptocurrency license.

a. Estonia offers the least costly solution in contrast to the UK, Singapore, Japan and the USA, which are 3 or 4 times more expensive.

b. Registration of the company and license is very time effective-takes approximately 45 days. Other countries would take from 3 up to 8 months.

c. Licenses are issued by the Estonian Financial Intelligence Unit (FIU), which is an independent unit from the Estonian Police and Boarder Guard Board. The FIU is internationally accepted as a regulatory body.

d. Estonia is open to entrepreneurs from all over the world and is one of the most developed countries regarding digitalization and IT. An entrepreneur who intends to do business in Estonia should apply for an e-residence card that allows access to all government services and simplifies communication with state authorities.

e. There is no profit tax in Estonia.

There are two types of licenses you can apply for in Estonia:

1. Being a provider to exchange virtual currency to fiat currency and vice-versa

2. Being a provider of virtual currency wallet service
Both licenses fall under the same legal, operational and tax framework. The operating licenses are issued by the FIU and an application of such license shall be processed within 30 working days from the day of submission of the application.

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

Legal Requirements

• In case of insolvency/bankruptcy of the company, the shareholders are liable with their own capital.

• 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.

• All company shareholders may act in a capacity of board member.

• The person who is responsible for the anti-money laundering measures is to monitor client activity. Understanding indicators that are suspicious and may denote terrorist activity is included in these measures. In the case this happens the person must report to the Estonian authorities.

Taxation and Accounting

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.

Other taxes:
• Tax on dividends: 1/3 of gross amount of the payout taxed taxed at 14% and 2/3 at 20%.

• 33% tax on personal income (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).

• 7% personal income if you are a shareholder of an Estonian company, even if non-Estonian resident.

Legal Requirements

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 Acquire a License:

• Setting up a Company: incorporate a company in Estonia and open the corporate bank account to begin trading. Documents needed for incorporate the company are contact details of the company founders including legal place of residence and email address and telephone numbers and any social media contact. Details on the company name, website, and office hours contact details. Finally, a statement of the nature of the business. When the registration is complete then the application for license is allowed.

• Applying for a license: the Estonian regulation issues the cryptocurrency exchange license based on phone number, email address and website of the company registered in Estonia. The contact details of the shareholders, and people delivering the services of the company are also required. The same contact details of the company’s legal representative and information details of internal control of the company are required. Details confirming that the shareholders and members of the board have no convictions issued from the country of residence are also needed. It is a legal requirement that the company adheres to rules and procedures when dealing with cryptocurrencies.