Estonia Cryptocurrency: Laws, Licenses, Advantages, & More

Estonia Cryptocurrency: Laws, Licenses, Advantages, & More

Crypto License (VASP)
13 April 2023

Estonia was the first country to issue crypto licenses back in 2017.

This opened Estonia to any emerging company that wanted a license while still being able to operate from a foreign country.

Currently, Estonia is a forerunner in being able to control cryptocurrencies well. This is thanks to years of refining these laws to ensure the safety of the blockchain.

If you're interested in dealing with cryptocurrencies in Estonia, we'll give you a breakdown of what to expect in this sector — including taxation, the law, and more.

Cryptocurrency in Estonia: An Overview

Title Cryptocurrency in Estonia with an illustration of man holding giant bitcoin

Estonia is BIG on fintech innovation, with most of its financial system being digital.

We'll discuss the basics of what you should know about the virtual currency sector in Estonia.


The European Court of Justice says that cryptocurrencies are exempt from VAT.

But according to the Tax and Customs Board of Estonia, tax liability occurs with the following services:

  • Cryptocurrencies are converted into common currency - The difference between the acquisition cost and sale cost of the cryptocurrencies is what's taxed.
  • Cryptocurrencies are used as payment - The purchase price of the good or service received and the cryptocurrencies used should be defined.
  • Cryptocurrency is converted into another cryptocurrency - The market price and profit are calculated.

Services involving cryptocurrencies will be taxed similarly to other company activities in Estonia.

In short, corporate income tax isn't applicable as long as there's no profit involved.

Investors can invest in cryptocurrencies under your company, but the company's tax rules will have to be followed.

Rules and Regulations

In 2017, Estonia was the first to implement the EU Directive 2015/849 — making its emerging virtual currencies sector more open than other European Union member states.

This Directive inspired the Estonian Money Laundering and Terrorist Financing Prevention Act. Some of the provisions here include:

  • Obliged entities (meaning finance-related entities, including cryptocurrency companies) must identify, assess, and manage risks to lower the possibility of money laundering and terrorist financing. This includes making a risk management model that has simplified and enhanced due diligence measures.
  • Obliged firms have to ensure that their employees adhere to the regulatory framework. However, they should also provide skills training.
  • If an obliged company has two or more management board members, they'll have to appoint another member to ensure the Act's implementation.
  • An obliged entity can ask for identification and verification of customer data before entering into a transaction with them. The virtual currency service provider collects this data.

These provisions introduced strict reporting alongside other obligations for crypto wallet providers and sellers.

The country's national laws on cryptocurrencies also inspired the European legal framework regarding them.

Despite the law, it's important to remember that crypto is NOT a legal tender in Estonia. Instead, it's seen as a value that's represented in digital form.

In other words, cryptocurrencies can be used as a means of payment, but they're not the monetary or legal tender of its jurisdictions.

Updates & New Regulations for Crypto Companies in Estonia

Throughout the years, Estonia has made amendments to its Act to improve the efficiency of managing the risks of money laundering and terrorist financing in the future.

The newest amendments were enforced in March 2022. These apply to both existing and emerging virtual asset service providers (VASPs).

We'll discuss the requirements of new applicants in a later subsection. For now, these are the requirements for existing VASPs in Estonia:

  • Ensure by how much you should increase the share capital and specify your own funds' requirements.
  • Internal auditing is more important now than ever! The virtual currency service provider should outsource an internal auditor who will check how effective a company's internal controls and regulatory framework are.
  • Changing anything in the composition of the management board, shareholders, and such will now cost EUR 4,000.
  • Management board members of the service provider must have finished at least higher education and at least two years of professional work experience.
  • The transaction IDs and information of parties involved in an exchange must be saved and stored. They should share the data with a service provider that will monitor the transactions to ensure no suspicious activity.
    • Alternatively, the VASPs themselves can monitor the transactions — after proving that they have the technology and skills to do so.

All in all, existing VASPs have to double-check their internal controls, risk assessments, and management board members, among other things, and adjust them accordingly.

Cryptocurrency License in Estonia

Title Cryptocurrency License in Estonia with an illustration of hand holding an ID

Virtual currency service providers have been considered financial institutions since March 2020.

As such, they MUST comply with the same provisions and requirements as banks and similar institutions in the industry.

These entities need to have a crypto license if they offer one or both of the following crypto services:

  • Provision of crypto wallets and custodian services
  • Fiat currency and cryptocurrency exchange

Below, we'll discuss what you'll need to get a crypto license in Estonia.

Requirements for Getting a Cryptocurrency License in Estonia

For emerging companies who want a crypto license in Estonia, here are some of the requirements you should take note of:

  • CV and contact details of the company's owner
  • Company address and web page address
  • Name, personal code (or date of birth), place of birth, and address of the company's beneficial owners
  • Name, personal code (or date of birth), place of birth, citizenship, address, position, and contact details of the person in charge of applying international financial sanctions
  • Procedural rules and internal control policies
  • Statement from the owner's/board member's/beneficiary's country of origin's penalty register showing the absence of penalties regarding crimes against authorities, money laundering, terrorist financing crimes, and other deliberate crimes.

Amendments From the Money Laundering and Terrorist Financing Prevention Act

Aside from the abovementioned requirements, below are some amendments that emerging applicants in Estonia should also know about:

  • The share capital of the virtual currency service provider depends on the services provided. However, the authorized share capital for the company should be in common currency.
    • EUR 250,000 for companies that want to offer virtual currency transfer services
    • EUR 100,000 for companies that want to offer virtual exchange services
  • The service provider must have high-security information technology to efficiently and effectively identify and verify identity.
    • For a natural person, you should especially check the name and number of their identity document. This innovation should also help prevent the alteration or misuse of the data.
  • The business plan and financial projections should show plans for the next two years.
  • The internal compliance and risk management framework should follow the standards of the law.
  • You should have some local substance, meaning you should have something about the Estonian company—whether employees or managers.
  • The company and its investors should have a good business reputation and NO prior convictions on economic activities inside and outside of Estonia.
  • The company's own funds should be:
    • The same size as the authorized capital
    • Equal to the amount of funds calculated according to what is stated in the Act
  • Internal auditing by an outsourced auditor and the auditor's information must be specified when applying for the license.
  • Members of the board should have higher education and at least two years of professional work experience. The management board member should not be in service of more than two VASPs.
  • Pay a state fee application of EUR 10,000.

How to Apply and Obtain a Cryptocurrency License in Estonia

Title How to Apply & Obtain a Cryptocurrency License in Estonia with an illustration of a hand holding a pen while going through a checklist

The licensing process in Estonia can be quite long and tricky. But a great thing about the licenses in the crypto sector is that they're open-ended, meaning they don't expire.

To help lighten the load, we've outlined the steps on how to get your crypto license in Estonia:

  1. Establish a company in Estonia - You can do this in four ways:
    • Using an e-Resident card
    • By the power of attorney
    • Upon visiting Estonia
    • By getting a ready-made company
  2. Open a corporate account - You can easily do this online. However, you'll have to open an account from one of the banks within Estonia or with an international banking service provider registered in Estonia.
  3. Deposit the company's share capital - The share capital can be used to pay for the company's commercial activities.
  4. Rent an office in Estonia
  5. Employ an Estonian representative of a KYC/AML officer
  6. Draft the business plan and financial projections for at least two subsequent years
  7. Appoint an internal auditor to perform the tasks of the internal audit activity
  8. Appointing the external auditor
  9. Create procedural rules and KYC/AML documents - You can hire a qualified lawyer to help you prepare all the documents.
  10. Draft the description of services and the document describing management board member activities
  11. Draft the information technology systems description document, the document should also include the "Travel rule" section.
  12. Submit the balance sheet and profit and loss
  13. Apply for the crypto license - An Estonian company board member will file the license application. This can be done by:
    • Electronically using the e-Residency card
    • Upon a visit to a notary in Tallinn
    • Using the power of attorney
  14. Pay the EUR 10,000 to the Estonian Ministry of Finance
  15. Wait for the results - The decision on whether licenses are issued depends on the Anti-Money Laundering Data Office, which is unrelated to the Police and Border Guard Department. The process of FIU deciding whether to grant a licence within 60 business days after the date of application. Although FIU usually asks many additional questions during the process so the whole licensing process can take even more than 6 months.

Advantages of Getting an Estonian Cryptocurrency License

Title Advantages of Getting an Estonian Cryptocurrency License with an illustration of a giant bitcoin giving a thumbs up

Crypto companies prefer conducting their business in other countries in Europe using an Estonia license, thanks to the perks you can get. These include:

Fair and Accurate Regulation

You'll be able to benefit from the AML Act and other provisions in Estonia that will let licensed companies know how best to comply with the law.

A Good Business Environment

The e-Residency program gives you the benefit of establishing and running an Estonian company from ANYWHERE in the world.

E-residents of Estonia generate up to EUR 1 billion of economic activity through their companies in Estonia.

Lack of Corporate Tax

What's being taxed in Estonia are the distributed profits. These do get taxed in a way.

However, the important thing to remember here is that the taxation scheme in Estonia lets a company reinvest its profits tax-free.

Frequently Asked Questions

Title Frequently Asked Questions with an illustration of a box with question marks

The crypto industry in Estonia can be confusing.

To help you see the bigger picture of how the sector has evolved in Estonia, we've answered a few questions below:

Does Estonia Accept Bitcoin?

Yes, any virtual currency is accepted — as such, Bitcoin is also legal in Estonia.

Admittedly, the regulatory framework in Estonia is strict. But that makes it one of the BEST countries to trade Bitcoin (or any cryptocurrency) worldwide.

This also opens more opportunities for entrepreneurs!

In fact, the government actively stimulates the growth and innovation of the virtual currency service provider sector in Estonia.

If you're interested in investing, there are a number of good and popular platforms in Estonia. These include:

Is Crypto Mining Legal in Estonia?

Yes, virtual currency mining is legal in Estonia.

However, mining is considered a business activity, so Estonia treats it as a production of goods that can be taxed.

The mined virtual currency can be taxed the same way other cryptocurrencies are if:

  • It's converted into a common currency
  • It's converted into another virtual currency
  • It's used to pay for goods or services

Estonia also requires that you declare any mined income.

If you're independently mining as a private individual and income tax has not been withheld, you'll have to declare what you've mined as business income and pay taxes accordingly.

You can't deduct any expenses you've paid to get what you've mined — such as equipment or electricity.

However, suppose you plan to make mining a permanent activity.

In that case, Estonia will require you to register as a legal entity (whether a sole proprietor or company) in the Business register.

As a sole proprietor, you can deduct expenses like equipment related to your business.

But aside from income tax, you'll also need to pay social tax and the contribution to a mandatory funded pension.

You should also note that you CANNOT put virtual currency into the account used for tax deferral.

As a company, you can also deduct costs related to the business. You'll only get a tax liability when you have payments for:

  • Non-business expenses
  • Salaries
  • Dividends
  • Fringe benefits

Is It Easier to Buy a Ready-Made Company With a Crypto License?

No, it's not easier to buy a ready-made company with a crypto license.

If you carefully read through the specifics of the licensing process, you'll realize that the requirements you pass are carefully verified — particularly the following:

  • Owner
  • Director
  • KYC/AML officer
  • Procedural rules
  • AML documents

While Estonia is big on innovation in this sector, changing any major part of the company means those changes will have to be studied again.

There's an even higher possibility of revoking the license since it was issued for a different project.

In fact, one of the most common reasons that a license gets revoked in this sector is the changing of owners.

Other problems that can get your license in Estonia revoked are:

  • The inability of the core members to fulfill their tasks
  • Lack of contributed share capital
  • A physical office that did not meet the regulator's standards

The process of reviewing changes is around two months — the same time as getting a license for a new company.

Your license is also suspended in Estonia during the whole review process.

Why Has There Been a Change in Estonia's Cryptocurrency Laws?

Estonia was the first country to issue licenses for virtual currencies back in 2017.

However, the laws were too lenient that anyone who underwent the licensing process got approved, regardless of service.

The laxness of the laws made business difficult for any company that was trying to operate ethically.

Two major problems that emerged from that laxness were money laundering and terrorist financing.

Estonia improved its legislation on the process after the 2018 money laundering scandal that involved Danske Bank. There were even allegations of suspicious money flows that reached up to EUR 187 billion!

2020 marked one of the biggest changes when the Ministry of Finance became the crypto regulator — which has more expertise in the finance industry than the Ministry of Interior Affairs.

With the expertise of the national Financial Intelligence Unit (FIU), it was discovered that huge illegal funds were moving through the blockchain and shell companies. 

A closer look at these companies showed that while they were registered and did service in Estonia, they DID NOT have a physical office or core member in the country.

Aside from a good regulatory framework, Estonia also tried to prevent fraud and other problems with the help of crypto technology — such as blockchain analytics tools.

However, the government also admitted that they should find the perfect balance between strict-enough laws and being too heavy-handed.

After all, being too strict might scare investors and entrepreneurs away from Estonia in the future.

It's also worth noting that this framework will only protect those who fully understand what they are investing in.


Title Conclusion with an illustration of a smartphone and a wallet with a bitcoin inside along with an Estonian flag in the background

Cryptocurrency is legal in Estonia — although not legal tender.

The digital financial sector thrives in Estonia thanks to its improved regulatory framework on virtual currency services.

This will largely benefit any emerging crypto business since the FIU can check and control the flow of the blockchain.

Admittedly, getting a license in this sector can be quite tricky.

For one, the law in Estonia requires that you have someone with skills in information technology to help verify someone's identity before you offer your service.

Another requirement is to have a business plan and financial projections for the next two years.

However, all these are also for entrepreneurs who want to do honest business in Estonia.

If you’re interested in updating or obtaining the Estonian crypto license, feel free get in touch with us via our webpage or write directly to