Mechanism and history of crypto regulation in Estonia
Virtual money is a thing that is presently in everybody’s brain. Further, we will talk about one of the main subjects of the previous year – new cryptocurrency regulation in the Estonian market.
The new report expresses that in 2019, the relevant authorities of Estonia gave in excess of 660 licenses permitting the trading of fiat assets for cryptocurrencies.
Notwithstanding, toward the finish of a year ago the greater part of such licences were revoked. The explanation is that the greater part of licensed companies have not started their activity. According to the Estonian law if the company does not begin work in a period of a half of a year from the receipt of the licence, the license can be revoked.
Why didn’t the companies start doing business? Probably, because the rules under which such activities are to be conducted have changed significantly. Let’s take a closer look.
Let’s turn to history.
For the first time, the very concept of “cryptocurrency” appeared in Estonian legislation in 2017. At the same time, Estonia became the first state to add 2015/849 to EU legislation. This directive was the first legal act to introduce European legal regulation for virtual currency. Thus, Estonia is now a popular state for entrepreneurs looking to make their business-project legal.
The last quarter of 2019 was marked by the fact that the Ministry of Finance opened a public discussion of the issue related to potential new procedures for regulating cryptocurrency markets.
Changes in Estonian legal framework
Next, we will take a closer look at exactly what changes will be made to Estonian legislation in 2020. Moreover, we will tell in more detail about the work procedure of Eternity Law International specialists in this field.
General licence
Two licenses that existed before (permission to provide crypto-wallet and exchange crypto for fiat) is replaced with one – a provider of cryptocurrencies services.
Submission of documents
Documents required to obtain the licence are to be send through a representative of a Notary Office or using an electronic resource – Commercial Register.
Period within which a decision can be get is 60 days, and it can be extended to 120 days.
License fee
The state fee increase: from 345 to 3,300 euros.
Proper staff requirements
Individuals who hold senior positions must have an exceptionally clean reputation.
Such a strategy has for some time been the standard in commercial field. The characteristics and information of individuals, in whose hands your crypto business is, must be properly checked and meet high standards.
In accordance with new provisions, along with filing application, entrepreneur must provide certificates or other documents that would prove that he/she has appropriate education, experience, absence of criminal prosecution, etc.
Eternity law International specialists are able to conduct a personal verification for you.
Place of work
The company must be located in Estonia. This should be recorded in the Articles of the company and in Commercial Register.
Significant point here is, that creating a “virtual office” isn’t sufficient to fulfil new requirements. The company and individual should be actually present on the territory of the State.
Having local office, a businessperson will deal with his/her business more successfully, that is significant for the best possible insurance of customers’ rights and assets.
AML regime
Provision of the services in the field of virtual currency generally is considered as provision of financial services. Under the new rules, activities of crypto service providers are subject to Estonian AML law regime.
Eternity Law International has been working in the financial services area for a very long time, so we can quickly find the most optimal solution for your business-project.
Payments account
Provider of cryptocurrencies services needs to have a payments account in a PI, EMI or credit institution domiciled in Estonia or other state of the ECA, which is capable of conducting cross-border services in Estonia or is able to provide its services via a branch in Estonia.
The requirement is an obstacle for some providers. This is due to the fact that, until now, many banks do not want to deal with the new and unknown crypto-sphere. However, we assume that now that the regulatory procedures are much closer to the rules generally applicable in the financial sphere, the situation will change.
Capital
Minimum capital requirement: 12 thousand euros.
The entire amount must be paid in cash. There is an option to pay capital in cryptocurrency, however, it is worth discussing the FIU and the auditor in each case.
Active companies
All that is described above applies not only to entrepreneurs who are only planning their activities, but also to already active companies. Before applying for license, make sure that your company meets all the necessary requirements.
E.g., you will need to provide written evidence of integrity of current director reputation, as well as beneficiaries and prosecutors. In addition, you need to explain why these individuals are in this position.
Contact individual
If you have not recently selected a contact individual, so care about it. Likewise, check the firm’s interior documentation to guarantee that it conforms to new guidelines.
Eternity Law International has been working in the sphere for a long time, and as we can see new regulation of crypto business in Estonia is aimed to treat the sphere in a similar to general financial sector way.
Let’s summarize
Introduction of new regulation to crypto industry has done its job –cryptocurrencies have become not so attractive to criminals. We think that new legislation will bring order and certainty into the sphere.
The specialists of our company will give competent advice on obtaining a license of Provider of virtual currency service in Estonia, also, in case you need legal advice in order to comply with new regulation or you need to freeze or renew existing listens, don’t hesitate to contact us.