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Estonia is a cashless society with over 99% of financial transactions occurring digitally. Electronic ID and Blockchain are widely used in FinTech applications. 80+ FinTechs ranging from innovative startups such as Wise to Blockchain leader Guardtime make Estonia a global centre of excellence for FinTech.
| Digital by design, Estonian financial services have applied FinTech for over 20yrs. | |
| Daily utilisation of distributed systems, electronic ID and smart contracts. | |
| World-class skills in software, high tech systems, process automation and cyber security. | |
| Digital environment supporting rapid innovation, development and launch of solutions. | |
| Global proof of concept in segments including Blockchain, payments and banking. |
Estonian financial technology experts have over 20 years of greenfield development experience having established a high-level functional financial system from scratch. Financial IT systems and services in Estonia are highly innovative combined with user-friendliness.
Estonia’s FinTech journey has its roots in e-Estonia, when the government, financial services, and telecoms providers collaborated to create a unique environment. Digital service delivery was supported by the development of electronic ID, smart contracts, high-speed connectivity, and enabling legislation. Nordic banks were early beneficiaries and continue to profit from efficient and agile business models.
Estonia has utilised decentralised, distributed systems since 2001 and Blockchain since 2008. The world’s largest Blockchain company, Guardtime, was born and continues to have significant operations in Estonia, while Blockchain startup Funderbeam attracts global investments. NASDAQ has completed a successful trial of Blockchain based shareholder voting in Estonia.
In payments, Estonia has produced globally successful companies including Fortumo, award-winning Monese, and the unicorn Wise, each of whom has significant R&D, engineering, and 24/7 multilingual client service operations in Estonia.
Estonia also possesses expertise in enterprise-grade solutions, including Fitek’s F&A robotic process automation and Arvato Bertlesmann’s IT Development and Innovation Center.
Further success is expected as Estonia’s expertise in finance and IT, high entrepreneurship, and pro-business environment including regulation promote rapid development and launch of solutions in areas like cryptocurrencies and AI.
Whether you seek innovation, reliable engineering or an operational hub within the EU regulatory framework, Estonia is a smart, agile location for FinTech businesses.
Estonia is one of the hotspots for crypto companies in Europe and the popularity of cryptocurrency fits with Estonia’s image as a tech success story. The growth in this sector is remarkable and investor´s interest in any blockchain-related solutions is high.
The taxation of transactions with bitcoin and other cryptocurrencies in Estonia is regulated the same way as any other corporate activity – as long as the profit is not distributed there is no corporate income tax applicable.
According to the ruling of the European Court of Justice, cryptocurrencies are exempt from VAT.
As per the Estonian Tax and Customs Board tax liability arises in three cases:
In the case of cryptocurrency, only those transactions from which income is earned are taxed, whereas the income earned is the difference between the acquisition cost and the sale price of the cryptocurrency. When exchanging one cryptocurrency for another, the market price and the income or profit earned must be calculated. When paying for goods or services with cryptocurrency, the income earned, in other words, the difference between the purchase price of the goods or services received and the cryptocurrency used, must be defined.
If a private individual mines cryptocurrency, the income must be declared as business income. A person permanently engaged in virtual currency extraction must be registered in the commercial register and operate as a sole proprietor or a company. It is possible to invest in cryptocurrencies under the company, in which case the company’s tax rules must be followed.
Estonia is one of the pioneers in blockchain technology and one of the first countries to offer cryptocurrency business licenses.
An activity license for the provision of financial services must be applied to operate in the following fields of activity:
As of March 2020, virtual currency service providers are considered “financial institutions” in Estonia. Crypto companies are required to comply with the same reporting rules and requirements as any other financial institution in Estonia. A unified cryptocurrency license in Estonia allows exchanging cryptocurrency for fiat and cryptocurrency for cryptocurrency. With the Estonian cryptocurrency license, the company can provide crypto/fiat exchange services also with market leaders like Coinbase, Kraken, CEX.IO, CoinMetro, and our own startups like Paxful.
The cryptocurrency license is granted by The Financial Intelligence Unit (FIU) and is valid indefinitely. Nevertheless, the Ministry of Finance is planning to further tighten the licensing of cryptocurrencies. This would see the Financial Supervisory Authority (Finantsinspektsioon) be responsible for monitoring and regulating the sector instead of FIU. This means that most of the requirements which now apply to other financial services, such as payment services, will also apply to virtual currency service providers.
A crypto-company in Estonia can benefit from fair and accurate regulation. In 2017 Estonia was the first country to implement EU Directive 2015/849 to the national laws, which in turn was the first law to set the European legal framework for virtual currencies. The Estonian Money Laundering and Terrorist Financing Prevention Act and related provisions define virtual currencies and introduce further obligations for cryptocurrency sellers and wallet providers to fully comply with the law, including strict reporting.
Success stories in the Estonian FinTech sector include:
Arvato Bertlesmann, Bondora, e-Residency, Fitek, Fortumo, Friendly Finance, Funderbeam, Guardtime, IPF Digital, Monese, NASDAQ, Pocopay, Wise, etc.
These websites can be useful when interested in FinTech in Estonia:
You are also welcome to send us a request for personal e-consulting to obtain more specific information.
Estonia is not only a pioneering digital society, which has found convincing answers to the challenges of digitalization, but it also is a very green country. There is a strong societal and political will to utilize the capabilities and ecosystems. These have been developed to tackle the challenges of decarbonization of the economy and to become once again a leading player – in CleanTech and GreenTech.
Estonia is a cashless society with over 99% of financial transactions occurring digitally. Electronic ID and Blockchain are widely used in FinTech applications. 80+ FinTechs ranging from innovative startups such as Wise to Blockchain leader Guardtime make Estonia a global centre of excellence for FinTech.
Estonia has a sizeable Advanced Industrial sector and world-class IT expertise in areas including high tech systems, control technologies and cyber security. Supported by a collaborative ecosystem well suited to research and development, Estonia is emerging as a centre of excellence in industrial automation.
Estonia developed X-Road, its proprietary decentralised, distributed system in 2001 and has utilised Blockchain since 2008. World-class technical skills supported by practical experience implementing public and permissioned Blockchain’s place Estonia at the forefront of the emerging Blockchain economy.
Patient records in Estonia are digitised and secured by the Blockchain, providing a single immutable data source for healthcare professionals. With a unique digital platform and collaborative ecosystem, Estonia is positioned to lead on preventative medicine, patient self-treatment and industry efficiency.
What is it like to run a business in Estonia? How to benefit from the e-solutions and the efficiency of our business culture? What are the opportunities in specific sectors? Who to partner up with?
The Estonian Investment Agency’s team is happy to help you via its complimentary e-Consulting service, organize online or offline follow-up events such as virtual investment visits and guide you through the fairly simple process of investing in Estonia.
