How Cryptocurrencies Are Regulated in Estonia?
As the president of Estonia, I represent the only truly digital society which actually has a state; almost all our citizens' interactions with the government, including voting, can be done securely online, and our 'e-residents' can incorporate and run their businesses in Estonia without ever having to set foot here, said Kersti Kaljulaid, President of Estonia
Estonia is one of Europe’s most tech-savvy nations which is open to innovation and the latest technology advancements. As per the Wired Magazine, Estonia “is the most advanced digital society in the world.” What separates Estonia from its developed European countries is that the entire infrastructure of this nation runs digitally.
The Estonian government since the year 2008 has been testing Blockchain technology to make the public services of the country accessible 24*7 to the residents with a few clicks. The government of Estonia has integrated the Blockchain technology to diverse spheres such as legislative, judicial, and health.
Till 2020, the cryptocurrencies such as bitcoin and ethereum still don't hold any legal status in Estonia, but they can be easily accepted by anyone as payment or means of exchange. Unlike many countries across the globe, there is no restriction on the trade of cryptocurrency. This is the reason, there are so many ether wallet websites set up in Estonia.
Estonia is the first nation in the entire Europe you clearly allow the regulation of cryptocurrencies in the country.
However, still, there is no legal definition of civil laws, it is completely unsettled, maybe in the years to come, the Estonian government is going to clarify it.
Estonia has no specific taxation laws over the exchange of cryptocurrencies and ICO trade. The tax legislation of Estonia has not imposed any special rules & regulations for-profits, income or gains that are obtained from the transaction of cryptocurrencies or the charges incurred over the ether wallet exchange service
But, one thing to note here is that the cryptocurrency transactions are subjected to VAT. The objective of Value Added Tax is to treat cryptocurrencies similar to the nation's currency Euro. So, in simple words, the cryptocurrencies as remuneration are alike the usage of legal tender. The standard rate of VAT is 20% in Estonia.
Money Laundering Laws
In the period January 2008 to 27th November 2017, digital wallets such as ether wallets and electronic currencies were unregulated under the EU laws. After this, the Estonian government implemented the 4AMLD law, Money Laundering and Terrorist Financing Act, MLTFPA) on November 27th, 20017.
The MLTFPA act introduced new definitions in terms of cryptocurrency regulations in Estonia and a clear-cut regulation for cryptocurrency exchange and digital wallet service providers operating in the country.
This ACT comes into force to introduce two new license types, one is for the provider of service of cryptocurrency against the fiat currency or vice versa. The other being the provider of digital currency wallet service, known as a crypto wallet.
According to the latest report released by the Estonian Financial Intelligence Unit, the government has till now has issued 410 licenses to crypto wallet service providers and 500 licenses for crypto exchange service providers.
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