The Money Laundering and Terrorist Financing Prevention Act of Estonia (MLTFPA) applies to providers of virtual currency services. The Estonian so-called “crypto license”, issued by the Estonian Financial Intelligence Unit, FIU, includes the two following activities:
- Virtual currency wallet services, i.e. generating and holding private keys of customers; and
- Virtual currency exchange services, i.e. exchange between fiat and crypto currencies and crypto-to-crypto exchange.
Virtual Currency is defined as a value represented in digital form, which is digitally transferable, preservable or tradable and which natural persons or legal persons accept as a payment instrument, but that is not the legal tender of any country. Bitcoin, Ethereum and other cryptocurrencies fall under the definition of Virtual Currency from the MLTFPA. Depending on the functions and rights given to its holders, some tokens may also fall under the definition of Virtual Currency.
There is a single license irrespective of the activities performed. If a company provides only one of the activities, a license is still required. These licenses are granted by the Financial Intelligence Unit (FIU) that is part of the Estonian Police and Border Guard Board.
On 10 March 2020 amendments to the MLTFPA entered into force, which introduced some new requirements. Companies applying for a license for the provision of a virtual currency service have to comply with the new requirements starting from 10 March 2020. Companies holding “crypto licenses” before 10 March 2020 will have to be compliant with the new requirements by 1 July 2020.
Licensed providers of a virtual currency service will have to apply the same AML measures as financial institutions (financial institutions are licensed by the Estonian FSA, Financial Supervisory Authority). That includes:
- internal anti-money laundering rules of procedure customized to fit the business model at hand;
- Appointing a Compliance officer;
- Undertaking KYC of all their customers; and
- Monitoring the business relationships with the customers.
Other changes brought by the amendments that entered into force on 10 March 2020 include:
- The state fee for a new license application is 3300 euros.
- The registered office, the location of the management board and the actual place of business needs to be located in Estonia.
- A payment account needs to be opened in a credit institution, e-money institution or in a payment institution in Estonia or in any other member state of the European Economic Area.
- The minimum share capital requirement is 12 000 € (paid in).
- The FIU has 60 days with the possible extension to 120 days to render the decision whether to grant a new license.
- Stricter due diligence of the management board members, e.g. the management board will be scrutinized for their experience, skills and expertise.