Cryptocurrency license

If you’re interested in securing a cryptocurrency license in Estonia, it’s crucial to understand the process of confirming the existence and handling of virtual currencies. This guide provides a step-by-step overview of the requirements and procedures involved in obtaining the license.

• Confirming Virtual Currency Balances:
  a. Third-Party Platforms: Platforms like Kraken and Binance allow balance confirmation at year-end. Alternatively, one can retrieve asset balances through transaction history extracts.
  b. Auditor Verification: For platforms without confirmation options, auditors require formal sign-off on balances or physical verification of their existence and accuracy.
  c. Storing on Own Computer: If virtual currencies are stored on your computer, provide a list of wallet addresses used by December 31. Balance checks can be done through blockchain explorer websites like ethscan.io.
• Recording Inventory Values:
  Ensure accurate recording of inventory values by using year-end market prices and comparing them to recorded values. If virtual currencies are stored on your trading platform, liabilities must be accounted for in euros using market prices as of December 31.
• Confirming Obligations:
  Confirm obligations by reconciling them with third parties. Focus on a random sample of customers and the largest customers. Automating this process is recommended for platforms with a large customer base. Platforms like Kraken already facilitate balance confirmations with auditors.
• Internal Control System:
  Provide auditors with an opportunity to review your internal control system to ensure accurate and reliable accounting of obligations.
• Transaction Statements and Databases:
  For traders using third-party platforms, rely on transaction statements and reconcile them with accounting records. For those with internally created platforms, maintain a comprehensive database of all transactions, including transaction details and wallet information.
• Conversion of Sales Revenue:
  Ensure accurate conversion of sales revenue from virtual currency to cash when submitting data to auditors. Consider transaction fees and market price fluctuations, which can significantly impact reported sales revenue.
• Data Verification and Processing:
  For companies with a large volume of transactions, manual verification using programs like Excel might not be feasible. Consider using specialized software for large-scale databases. Accessibility and transferability of data are crucial for auditors to analyze and control the entire transaction volume.
• Market Price Changes:
  Changes in market prices of virtual currencies during the year can result in income or expenditure. Ensure proper accounting of these changes and provide auditors with the necessary information for verification.
• Fulfillment of Own Funds Criteria:
  All virtual currency service providers must ensure that their own funds meet the criteria set by the Money Laundering and Terrorist Financing Prevention Act and their activity license. Auditors verify and confirm the accounting of own funds with the Financial Intelligence Unit (FIU) once a year.
• Reporting Requirements:
  Submit audited calculations of own funds based on the balance sheet at the end of the reporting period. Consider conducting the audit on the balance sheet day or an earlier date if practical.
• Verification of Own Funds:
  Auditors should verify the volume of transactions, assets, and liabilities to ensure accurate calculation of own funds. Follow the instructions published by the FIU and the Ministry of Finance for proper handling of virtual currencies as intangible assets.

Conclusion

By following these guidelines and ensuring compliance with the requirements, you can successfully obtain a cryptocurrency license in Estonia. It’s essential to prioritize accurate accounting, reconciliation, and verification processes to maintain the integrity of the license.