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Cryptocurrency

If your company:

  • Offers fiat-crypto exchange to third parties, that is, it offers a service that allows its users to exchange euros, dollars, etc. for bitcoin, Ethereum, or any other cryptocurrency.
  • Manages the finances of users or clients in cryptocurrencies, that is, it manages wallets of its users or clients that contain cryptocurrencies.
  • Has or is preparing its own token with economic value (security) / or is preparing an ICO or similar.
  • Wants to launch an exchange, or a wallet service, that owns or manages tokens or cryptocurrency on behalf of its clients.

In any of these situations, your company is a crypto-business and needs to obtain the correct licenses to operate.

On the contrary, if your company only exchanges fiat for crypto privately as an investment in well-known exchanges like Kraken, but without offering this service to third parties, you are not considered a crypto company with the new legislation, and therefore you do not need to obtain the licenses.

So what do you need, accountancy-wise, if you are just going to have a corporate account at an exchange platform such as Kraken, just for investment within the company?

  • First, you need to open a new account in the name of the company in the exchange or platform (Kraken, CEX.io, etc). No, you cannot use your personal account, even if you change its name. You need to open a new one for the company.
  • When you add money in the exchange or platform, or later when you withdraw it back to your company’s regular bank accounts, you need to get a receipt or transfer justification from the platform and upload it to the dashboard in purchase invoices and sales invoices respectively.
    • The document for the money that gets in the platform allows us to understand that this is not an expense, but a movement into this crypto-exchange account that is part of the funds of your company.
    • The document for the money that gets out of the platform back to your corporate account allows us to understand that this is not a sale, but a withdrawal of funds (return of investment) from your crypto-exchange account.
  • Then, every month, you need to upload, in the bank statements section, a spreadsheet of the transactions and investment operations performed with the money of the company during the previous month. Most platforms provide this.
  • Consider your crypto-exchange account as a “bank account”. It is not in the strict meaning of the word, but it holds funds of the company, therefore we need to know what’s going on with this money to do your accountancy correctly.

The process is complex and can take from weeks to a couple of months, especially since the legislation changes of 2020. We can’t help you with the licensing. You need to contact an Estonian law firm.

We can take care of the accounting, taxes, and compliance of your company if it has the necessary licenses, though. However, before you start your operations, we need you to obtain the appropriate licenses.

One of the most important steps to open a crypto-company is obtaining the corresponding licenses. To obtain these licenses, you need to elaborate, at least, the AML and KYC documents. It is important that you know the information they should contain and how to elaborate them.

On the one hand, the AML document. This is your anti money laundering document.

It includes the measures and protocols that you implement to ensure that you avoid the use of your platform for money laundering and terrorism activities, as well as the technical mechanisms and procedures you apply to avoid such activities. This includes from the correct identification of the users and the documents that are requested to them, to the mechanisms to ensure their identity (video conference? Face-to-face meeting? Collection of documents? Photos?) And how you track the data of the users (audits? automated analysis? detection of suspicious activities?).

On the other hand, there is the KYC document (Know Your Customer).

This document is a guide to the information requested from users or customers or your platform, specifying all the information you collect (such as name, surname, age, passport or ID, education, work, bank details…). There is a lot of information that can be requested, and each platform and system is different and therefore needs different data. Some will make sense for some platforms, and others will not.

The KYC document should include at least the information form that will be presented to the user or client when signing up, as well as an explanation of any other document or data requested (passport, etc).

It is convenient for any crypto-company, exchange or startup to elaborate this documents, not just for obtaining the licenses, but also because they are essential for the activity of the company. They will be requested from investors to financial authorities in the future.

We cannot prepare these documents for you, you need to contact a Estonian law firm to help you in the licensing process.

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