In less than a year since Estonia introduced a licensing regime for cryptocurrency companies, the number of licenses issued has surpassed 900. The Baltic nation has adopted a progressive approach to regulating digital assets, but startups continue to complain that local banks are still reluctant to offer them regular banking services.
Approval Takes About Two Weeks
Estonia, one of the first EU member states to legalize crypto-related activities, grants two types of licenses. So far, approximately 500 licenses have been issued to digital asset exchange platforms, and over 400 to cryptocurrency wallet providers. This data comes from Estonia’s Register of Economic Activities, recently summarized by the law firm Njord, which specializes in the sector. The Estonian Financial Intelligence Unit (FIU), the licensing authority, has 30 days to review each application, but in most cases approval is granted within one to two weeks. However, a license can be revoked if the company fails to commence operations within six months. The main requirements stem from know-your-customer (KYC) and anti-money laundering (AML) regulations. Crypto entities registered in Estonia legally operate across the EU and must comply with relevant local and European laws.
Opening a Bank Account Still a Problem
Much like other crypto-friendly jurisdictions (e.g., Switzerland), Estonia’s traditional financial institutions have been slow to catch up with regulators. Restricted access to regular banking services remains a major hurdle for local fintech businesses, many of which now rely on foreign banks and payment providers. Nikolay Demchuk from Njord commented: “Opening a bank account is the biggest problem facing crypto companies. Estonian banks are not yet ready to serve clients operating with cryptocurrency.” Despite this, favorable conditions have attracted many investors. In early June 2018, the trading platform Coinmetro was granted both wallet and exchange licenses. Later that month, Ibinex, a developer of trading software and white-label solutions, obtained a license. In September and November, the FIU approved applications from two new cryptocurrency exchanges – Ironx and B2bx.
Taking the Lead in Europe
Estonia’s new Money Laundering and Terrorist Financing Prevention Act came into force almost a year ago, making it the first EU country to regulate cryptocurrency circulation and implement a licensing regime. The country once planned to issue its own digital currency, Estcoin, but abandoned the idea under pressure from the European Central Bank. ECB President Mario Draghi stated, “No member state can introduce its own currency” in the Eurozone. In summer 2018, reports indicated the government would proceed with a limited-scale project to issue an Estonian digital token for transactions among participants in its e-residency program. Tens of thousands of foreign nationals have already received special digital ID cards, enabling simplified company registration and preferential taxation. Estonia’s licensing system provides a valuable blueprint for other nations, but the persistent banking access problem highlights the need for synchronized development between regulation and financial infrastructure.