Crypto Regulations in Estonia
It is legal for residents in Estonia to own, buy and sell cryptocurrencies and blockchain-based assets, which is regulated by the Estonian Financial Intelligence Unit. This can be done through exchanges, Bitcoin ATMs and peer-to-peer.
Source: Coinfirm
On November 27, 2017, Estonia enacted amendments to its anti-money laundering legislation that define cryptocurrencies (virtual currencies) as the value represented in digital form that is digitally transferable, preservable, or tradable and that natural persons or legal persons accept as a payment instrument, but that is not the legal tender of any country or funds (banknotes or coins, scriptural money held by banks, or electronic money). The anti-money laundering legislation now also applies to providers of a service for exchanging virtual currency with fiat currency and providers of a virtual currency wallet service, which is defined as a service in which keys are generated for customers or customers’ encrypted keys are kept, which can then be used for the purpose of keeping, storing, and transferring virtual currencies. Virtual currency service providers are required to have a license.
Source: Freeman Law
In April 2019, the Estonian Financial Intelligence Unit (FIU) created additional regulations for the cryptocurrency license process which included, but were not limited to, paying a licensing fee, registering a headquarters physically located in Estonia, and identifying customers. In addition, new regulations and legislation were considered regarding the governing of crypto tokens and other blockchain-adjacent currencies and funds. Following these new regulations, the FIU withdrew more than 1,000 activity licenses of virtual currency companies in 2020. At this time roughly 400 virtual currency service companies remain active in Estonia. Mr. Veiko Tali, the secretary-general of the Ministry of Finance, stated that “the commission plans to retain heightened attention to this topic [in 2021]. A number of important regulatory changes are planned for the services of virtual currencies in order to further regulate the field.”
Source: Freeman Law
Estonia cryptocurrency regulations are open and innovative, especially in comparison to other EU member-states. Although not accepted as legal tender, Estonia’s government regards cryptocurrencies as “value represented in digital form”: accordingly, it classifies cryptocurrencies as digital assets for tax purposes but does not subject them to VAT. In 2017, the Anti Money Laundering and Terrorism Finance Act introduced robust new regulations for crypto businesses operating in Estonia.
Source: Comply Advantage
Estonia was a pioneer in adopting cryptocurrencies and it did it by being the first country in the European Union that provided a legal framework for virtual asset service providers (VASPs) and enabling them to obtain operating licenses. The first AML law that included VASPs, set strict know-your-client (KYC), customer due diligence (CDD) and anti-money laundering (AML) measures that these businesses were set to follow. However, the lack of transparency and trust within the sector became apparent when businesses associated with Estonian VASP licenses were reported for disappearing with investor’s money. This meant that the government had to drastically improve the legislation and lead to new amendments in 2019 and 2020 after which over 1,000 financial service licenses were revoked as businesses became actively non-compliant with the legislation.
Source: AML Compliance
Not Available
The purchase price can always be taken into account. Only transactions that make a profit are reported, if they break even or come out at a loss, they are not reported. The tax rate is always 20%. Losses cannot be taken into account and crypto assets are not stocks. This means that an investment account cannot be used in the same way to defer any tax claims. Crypto assets do not fall into the legal definition of stocks/securities. It’s that simple, and that’s why it can’t be done right now. Location is also important for tax purposes. Everything I am talking about here today is valid if the person is a tax resident in Estonia. And they have to pay taxes on all their crypto assets transactions in Estonia.
Source: Binance
Taxable income received in cryptocurrency, such as rent, interest, business income, etc., is also subject to income tax. The article explains in which cases a natural person must declare income received in cryptocurrency. The term “cryptocurrency” refers to the exchange currency used, for example, for the sale/purchase of goods or services, as well as for investments aimed at maintaining or increasing the value of cryptocurrency. Cryptocurrency includes, for example, Bitcoin, Ether, Litecoin, etc.
Source: eMTA
Cryptocurrency exchanges are legal in Estonia and, following amendments to AML/CFT legislation in 2017, have operated under a well-defined regulatory framework that includes strict reporting and KYC and AML rules. In 2019, the government passed Estonia cryptocurrency regulations to tighten licensing requirements and went further in 2020, asserting that virtual currency service providers would be treated in the same manner as financial institutions under the Money Laundering and Terrorist Financing Prevention Act. In late 2020, the Estonian government revoked over 1,000 operating licenses after amendments to Estonian law rendered many cryptocurrency service providers non-compliant with regulations. Up until 2020, cryptocurrency exchanges in Malta had to obtain two licenses from the Financial Intelligence Unit of Estonia: the Virtual Currency Exchange Service License and the Virtual Currency Wallet Service License. After the recent tightening of AML controls the Estonian government merged these two licenses into the single Estonian Cryptocurrency Exchange License. Meanwhile, regulatory responsibility for monitoring and supervising the sector moved to the Financial Supervisory Authority.
Source: Comply Advantage
On the 15th of March 2022 amendments to the Estonian law Money Laundering and Terrorist Financing Prevention Act (Money laundering prevention and implementation of financial sanctions guidelines and legislation in Estonia and in European Union | FSA), which regulates cryptocurrency services offered by Estonian companies, came into force. The purpose of these amendments is to more effectively reduce the risks of money laundering and terrorist financing that arise during cryptocurrency transactions within Estonian companies. Since additional requirements for virtual asset service providers (VASPs) are being introduced to achieve this goal, already licensed VASPs, as well as new applicants, must bring their activities and documentation in line with the amendments as of 15.06.2022.
Source: Estonia Company
Striga is the first VASP to be approved since Estonia enacted a new legal framework restricting service providers in the bitcoin and crypto ecosystem. Striga gains regulatory approval to operate in Estonia as a VASP. The company is the first VASP to be approved following the country’s reworked legislation for VASPs. The law requires KYC information, capital requirements, and affiliation with Estonia.
Source: Nasdaq
Crex24, an Estonian cryptocurrency exchange, is accused of hiding a hack from its customers after terminating trade for altcoin pairings. There has yet been no explanation provided regarding the suspension by the exchange. The deposit and withdrawal services have also been discontinued. According to a report by the Brazilian crypto press, Livecoin, an anonymous Crex24 user claims to have noticed suspicious activities of the alternative cryptocurrency Htmlcoin, which points to cheating on the part of the exchange. The user had to face a loss of $32,000 in cryptocurrency in mid-February, as the exchange froze his reserves.
Source: Shufti Pro
Police says $13 billion laundered through Estonia More than $13 billion (11 billion euros) were laundered through banks in the small Baltic state of Estonia from 2012-2016, with at least 7.3 billion euros in assets through non-resident bank accounts, police said on Friday. The European Union member country has been rocked by revelations of money laundering from Russia, Moldova, and Azerbaijan via non-resident bank accounts that have forced lenders in Estonia and neighboring Latvia to shut down. Estonia’s police Financial Intelligence Unit (FIU) said that besides more than $6 billion laundered via Estonian banks in schemes discovered by national financial inspection agencies, a further unreported 7.3 billion euros was channeled via Estonian banks through the sale of Russian stocks and bonds.
Source: Reuters
Estonian businesses will soon be able to apply for guidance through a regulatory “sandbox” to help them use and develop artificial intelligence tools in a data protection-compliant way, the country’s privacy watchdog said. The Estonian project, set to be launched in the coming months, is a cooperation between the Ministry of Economics.
Source: mlex Market Insight
One of the possible solutions is to build Estonia’s first regulatory sandbox. While this may sound playful, it is a serious concept. Sandboxes facilitate innovation and enable firms to test – pursuant to a specific plan agreed and monitored by a supervisor – innovative financial products, financial services or business models with the result to bring such solutions to the market faster. A regulatory sandbox is nothing like a regular sandbox. One similarity though may be that the actors are usually young: young children here and young companies there, but both act under supervision. Another one is that they allow for creativity. Yet while children build sandcastles, start-ups need support not to become cloud-castles.
Source: EBRD
