Estonia and Cryptocurrency
Estonia Cryptocurrency Laws
Regulation of Digital Currencies: Cryptocurrency, Bitcoins, Blockchain Technology
On November 27, 2017, Estonia enacted amendments to its anti-money laundering legislation that define cryptocurrencies (virtual currencies) as 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).[1] 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.[2] Virtual currency service providers are required to have a license.[3]
Cryptocurrency license process
In April of 2019, the Estonian Financial Intelligence Unit (FIU) created additional regulations for the cryptocurrency license process which included, but was not limited to, paying a licensing fee, registering a headquarters physically located in Estonia, and identifying customers.[4] In addition, new regulations and legislation were considered regarding the governing of crypto tokens and other blockchain adjacent currencies and funds.[5]
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.[6] 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.”[7]
P.S. Insights on Cryptocurrency Legal Issues
Most jurisdictions and authorities have yet to enact laws governing cryptocurrencies, meaning that, for most countries, the legality of crypto mining remains unclear.
Under the Financial Crimes Enforcement Network (FinCEN), crypto miners are considered money transmitters, so they may be subject to the laws that govern that activity. In Israel, for instance, crypto mining is treated as a business and is subject to corporate income tax. In India and elsewhere, regulatory uncertainty persists, although Canada and the United States are relatively friendly to crypto mining.
However, apart from jurisdictions that have specifically banned cryptocurrency-related activities, very few countries prohibit crypto mining.
Our Freeman Law Cryptocurrency Law Resource page provides a summary of the legal status of cryptocurrency for each country across the globe with statutory or regulatory provisions governing cryptocurrency. The globe below provides links to country-by-country summaries:
Is cryptocurrency legal in Estonia?
Do you have questions about cryptocurrency, digital currencies, or blockchain technology?
Freeman Law can help with digital currencies, tax planning, and tax compliance. Contact us now to schedule a consultation, or call (214) 984-3410 to discuss your cryptocurrency and blockchain technology concerns.
[1] Rahapesu Ja Terrorismi Rahastamise Tõkestamise Seadus [Money Laundering and Terrorist Financing Prevention Act], Riigi Teataja [Official Gazette] RT I Nov. 17, 2017, § 3 (in Estonian), Rahapesu Ja Terrorismi Rahastamise Tõkestamise Seadus [Money Laundering and Terrorist Financing Prevention Act], Riigi Teataja [Official Gazette] RT I Nov. 17, 2017, § 3 (English translation).
[2] Id. § 2.
[3] Id. § 70.
[4] ERR, ERR News, Legislation aimed at ending cryptocurrency ‘party’ still on the table, (May 2, 2021).
[5] Consultation Paper on Regulating Cryptographic Assets (English Summary), by Estonian Ministry of Finance.
[6] Government AML commission: virtual currency service providers need heightened attention, December 11, 2020.
[7] Id.
