Estonia is a very progressive jurisdiction in such initiatives as e-Residency and Public Notary, and cryptocurrencies are already perceived by the state quite friendly. Estonia attracts companies with its legal regulation of cryptocurrencies and related activities. This jurisdiction is chosen because of the ease of starting a business, the speed of filling out financial statements and the progressivity of the country as a whole – in the Doing Business 20171 rating, Estonia ranked 12th among 189 countries.
Anyone who wants to start their own business can get an E-Residency ID card. The cardholder gets access to the developed e-state system of Estonia.
This card also provides fully electronic and remote interaction with the state when registering a company (registration, according to official data, takes only 18 minutes), working with banks, paying taxes, etc. The main goal of the e-Residency initiative and the Estonian government is to create an environment in which the business can focus not on completing the reporting, but on the implementation of their ideas. According to the 2017 Paying Taxes rating, in order to fulfill all the requirements for completing the financial statements in Brazil, entrepreneurs in 2016 had to spend approximately 562 hours each. On the territory of Ukraine – about 356 hours, in the USA – 175 hours, and in the territory of the Russian Federation about 168 hours. In Estonia, it takes only 84 hours.
Estonia is part of the European Union, which allows its residents to freely conduct business throughout its territory.
In 2017, Estonia became one of the most frequently used jurisdictions for registering cryptocurrency companies and conducting ICO. Before that, she was not particularly popular, although since 2015 the Forecast Foundation OÜ (creators of Augur) has been incorporated in the country. As of July 2017, at least five startups have chosen Estonia as the jurisdiction for holding ICO, which in total have raised over $ 77 million. At the same time, the minimum amount of funds collected by each individual company was at least four million (data as of August 2017).
Legal regulation of cryptocurrency in Estonia
Prior to the European Court of Justice Decision from October 22, 2015, which determined that Bitcoin was a currency, not a commodity for taxation, the Central Bank of Estonia did not recommend citizens to store Bitcoin or carry out monetary transactions, while comparing Bitcoin with a financial pyramid.
On November 27, 2017, in Estonia, the new Law on Counteracting the Legalization of Illegally Received Incomes and the Financing of Terrorism (Money Laundering and Terrorist Financing Prevention Act 2017; hereinafter MLTFPA 2017) entered into force, which makes it possible to engage in cryptocurrency business in Estonia legally. This law defines cryptocurrency as a virtual currency that the parties to the transaction recognize and use as a means of payment. At the same time, the cryptocurrency is not the currency of any country or fund. In addition, the law defines the legal framework for the sale and exchange of cryptocurrencies for fiat money and the maintenance of cryptocurrency wallets. The cryptocurrency activity is supervised by the EFIU (Estonian Financial Intelligence Unit).
Bitcoin and other cryptocurrencies are not considered by Estonian regulators as a form of debt, securities or electronic money, as according to paragraph 6 of the Law on Payment Institutions and Electronic Money Institutions (Payment Institutions and E-money Institutions Act; hereinafter referred to as PIEIA), Cryptocurrencies cannot be considered electronic money, since they are not issued by a specific issuer.
Legal regulation of tokens and ICOs in Estonia
On March 26, 2018, the Financial Supervision Authority (Estonian Financial Supervision Authority; hereinafter – EFSA) issued recommendations for the organizers and participants of the ICO. According to the document, while ICO uses new technologies and sells tokens rather than shares, the token can still be recognized as a security in accordance with Estonian legislation in the field of securities and the stock market.
In this regard, Estonia is a country in which it is possible to freely carry out cryptocurrency activities since it was one of the first to begin to develop relevant legislation and regulate cryptocurrency. To date, the rules for the exchange of cryptocurrency are defined, the rules for conducting an ICO are clearly established, and Estonian regulators are open to dialogue with business representatives.
EFSA has determined that in some cases, the tokens that are issued under the ICO may be regarded as financial instruments.
Legal regulation of cryptocurrency activities
Estonian legislation has previously established significant restrictions on the activities of cryptocurrency exchanges or companies that allow you to buy cryptocurrency for fiat currency.
Note that earlier when carrying out transactions in the amount of more than 1000 euros per month, it was necessary to “meet” with the buyer personally, as well as to identify the identity of each buyer by receiving a copy of the identity document. In addition, there was a requirement to store specified information about transactions and customers. Such information should have been provided upon request of EFIU2.
This fact is also confirmed by the words of the creator of the BTC.e. Otto de Fogda exchange, which he said immediately after the court made a decision to close the exchange (April 2016):
“The court decided to apply excessive regulation to the Bitcoin exchange, which does not apply to other economic activities. For example, the requirement to meet with the client in person, the requirement to keep a copy of the passport of ALL clients and report on persons who make transactions worth more than 1000 euros per month. ”