MiCA CASP License in Estonia

Estonia was one of the first European countries to enforce the MiCA regulation. As a trailblazer for crypto licensing, it was an expected development from a jurisdiction that made a reputation in the blockchain industry. By our lawyers’ assessment, Estonia still stands out as a noteworthy jurisdiction in the pool of European MiCA jurisdictions, especially for virtual currency service providers affected by the new regulatory changes.

The Estonian application of the regulation was done as early as June 2024, with the passing of the Market in Crypto-Assets Act, which serves as the legislative basis for the implementation of MiCA. Under the previous framework, Estonia licensed virtual asset service providers (VASPs), who are now transitioning to the new CASP license under MiCA.

The benefits of choosing Estonia for registering a MiCA-licensed Crypto Asset Services Provider (CASP)

Among all the European member states, Estonia stood out in the past decades for its liberal economy. Famous among entrepreneurs thanks to its 0% corporate income tax and for the high digitisation of its services, Estonia was also the first country to formulate a framework for crypto companies. The first Estonian crypto license in 2017 attracted such an amount of entrepreneurs and investments that a whole industry of corporate services providers was born as a consequence, to assist with the proper set-up of legal entities in Estonia and the conduct of crypto businesses.

To obtain a MiCA CASP license, it is mandatory to register a legal entity in Estonia. Under the Estonian Market in Crypto-Assets Act, the entity must operate as a private limited company (OÜ) or a public limited company (AS). Additionally, the company must appoint a management board consisting of at least two board members, with at least one being a resident in the EU and the place of effective management situated in Estonia. LegalBison, as an Estonian entity, has its roots in this story of successfully attracting industry trailblazers in the country.

Nowadays, Estonia surely benefits from the reputation of having incentivised entrepreneurs and crypto companies. The framework changed, but the 0% tax on undistributed profits remains, and the online infrastructures as well.

When MiCA came out, the Estonian authorities took the matter at hand pretty fast, and the country was the first to be able to enforce MiCA. It helped that the latest Estonian VASP framework was used as one of the bases of work to actually produce the MiCA regulation. As a consequence, existing Estonian VASPs benefit from the longest possible grandfathering period, of 18 months, allowing them to bring activities into compliance by 1 July 2026. This shows Estonia being simultaneously confident in its former framework and being on time with the new MiCA framework. A positive sign to crypto entrepreneurs willing to go for a MiCA license in a jurisdiction that has it figured out from day one.

How to apply for a CASP MiCA license in Estonia?

Applying for an Estonian CASP license to the Financial Supervision Authority (FSA) is a structured process. The licensing process is a rigorous procedure involving multiple compliance steps, including meeting capital, governance, and security standards mandated by the Digital Operational Resilience Act (DORA). There are a few steps, and they are comprehensive. However, the preparation underlying each stage should not be underestimated. A MiCA license, especially in an experienced crypto licensing country such as Estonia, requires minute planning and the involvement of highly qualified individuals for compliance with the regulation.

We laid out a more detailed explanation of the process, further down this page.

The main things to remember are that a MiCA license in Estonia can be granted to an Estonian company that carries out a complete application file, composed of all the necessary requirements and information set out by the regulation. Thorough document preparation is essential for a successful application, and a programme of operations outlining the company’s financial and operational strategy is a mandatory part of the application file.

National Competent Authority for MiCA enforcement in Estonia

The National Competent Authority (NCA) in Estonia for the enforcement of the MiCA regulation is the Estonian Financial Supervision and Resolution Authority (ESFRA), also known in the Estonian language as the Finantsinspektsioon (FI). The ESFRA is an independent public supervisory body acting on behalf of the Estonian State, whose role is to carry out supervision over banks, insurance companies, insurance intermediaries, investment firms, fund managers, investment and pension funds, payment institutions, e-money institutions, creditors and credit intermediaries, crowdfunding service providers, debt collection agencies, and the crypto-asset and securities markets.

Grandfathering right for existing VASP licensed companies in Estonia

Existing Virtual Asset Services Providers licensed under the previously existing regulation in Estonia are allowed to continue operating for a maximum of 18 months, until July 1st of 2026. The transition from VASP to CASP affects all crypto service providers operating under the previous regime, requiring them to comply with the new regulatory framework. The former Estonian VASP license was one of the bases for reflection for the MiCA regulation; the Estonian regulator is still confident in the viability of their previously licensed entities.

This information only pertains to existing and active Virtual Asset Services Providers. If you operate such a licensed entity and are confused about how to bring your activities into compliance for a CASP license in due time, we invite you to contact our legal experts and to acknowledge our article on the MiCA requirements.

Setting up a company for a cryptocurrency business in Estonia

Setting up an Estonian limited liability company (OÜ, osaühing) is fast and easy thanks to the digitisation of processes in Estonia. A lot of crypto entrepreneurs and others have been able to open their Estonian company digitally.

Done remotely, the incorporation process in Estonia still requires the notarization or Apostille of the identity documents of the board members. Once this administrative requirement is fulfilled, the process is streamlined. The applicant shall decide on a company name and provide contact details. However, it is important to note that under the Market in Crypto-Assets Act, the company must maintain a registered office in Estonia, and MiCA requires the place of effective management to be in the EU. The set-up of a compliant crypto asset service provider (CASP) in Estonia requires the addition of legal services, which we offer in packaged offers (see below).

Opening a corporate bank account is a mandatory step for the legal and operational setup of a crypto business in Estonia, particularly to meet safeguarding requirements for client funds and minimum capital requirements.

Banking for a CASP licensed company in Estonia

A MiCA license is a big help when it comes to opening a bank account. As the new regulation imposes very strong compliance requirements on CASPs, it also raises the level of trust of banking institutions in licensed entities. Licensed CASPs in Estonia are now regulated similarly to financial institutions, which enhances their trust and legitimacy in the market. Consequently, the regulation aims to facilitate access to banking services for crypto-asset service providers. Subsequently, banks in Estonia that used to be friendly with VASPs at some point in the past are now likely to consider working with crypto companies again.

The process of opening a bank account for a CASP in Estonia is the same as it used to be for VASPs in the past. However, the successful application for a CASP license will definitely help, as it is proof that the company applies a strong level of due diligence and is actively preventing financial crime.

Taxation for cryptocurrency companies in Estonia

Estonia has one of the most advantageous corporate tax rates among non-tax havens and so-called offshore jurisdictions. Revenue generated by Estonian companies is generally not taxed as long as it is not distributed.

Beforehand, the participants of an Estonian crypto licensed company should make sure that their country of fiscal residency has a double tax treaty with Estonia. A tax lawyer shall better advise them on how to properly transfer generated wealth to their personal accounts.