Estonia is a leading country when it comes to using technology in various administrative sectors, namely blockchain that is used is most of the government services. However, blockchain can also be used by private investors who can set up other types of business in Estonia, such as launching initial coin offerings or ICOs.
In this article, our Estonian company formation officers explain the main ways to create and launch an ICO. If you are interested in opening an Estonia-based ICO, our consultants can help you.
Legislation applicable to ICOs in Estonia
If you decide to create an Estonia ICO, you need to comply with the regulations of the Financial Supervisory Authority (FSA) here. As there is no specific law to comply with, the FSA has issued various regulations under which it can be established whether the digital money issued can be considered cryptocurrency and the means it can be traded. It should also be noted that all EU legislation applicable in this sector has been incorporated into Estonia’s national laws.
ICOs work like initial public offerings (IPOs) in which public companies trade shares and other financial instruments on the Stock Exchange. However, in the case of an ICO the main instruments to be sold are digital coins.
If you decide to open an ICO in Estonia, you can rely on our local consultants who will guide you.
Steps to create an Estonia-based ICO
You need to complete several steps to launch an ICO, and some of them imply the same as when opening a company in Estonia in other industries.
Here are the main steps to create an Estonia ICO:
- follow the usual company registration procedure (the private limited liability company is the main legal entity recommended);
- draft a whitepaper from which it must result the digital token offered for sale is a security or utility in order to make its trading possible;
- specific virtual money sale agreements and terms of use and services must be drafted;
- all these must be submitted with the FSA for approval.
It is worth noting that it can take between 6 months and one year to launch an Estonia-based ICO.
You can rely on us for assistance in setting up a company in Estonia.
Considerations when opening an ICO
Estonia follows closely the legal framework that Singapore and Canada have adopted to clarify and make the use of virtual currency safe, which is why it makes a clear distinction between utility and security tokens.
Security tokens are deemed financial instruments with the following characteristics:
- – they can be transferred if at least one of the parties involved in the transaction expresses their will;
- – if they offer voting rights to the issuer;
- – if they offer the possibility to generate money.
Utility tokens do not imply financial gains, as they only offer access to trading platforms and/or rights to use certain goods or services traded on the respective platform.
Out of the two types of tokens, only security ones can be used for an Estonia-based ICO.
In the light of these aspects, a license must be obtained with the Estonian Financial Supervisory Authority. For this purpose, the token issuer must draft a prospectus, just like in the case of investment funds, and file it with the FSA.
Fintech companies in Estonia
Launching an Estonia ICO comes with various advantages, which is why they have become quite popular. Here are some key aspects of fintech companies in this country:
- – blockchain is used in Estonia since 2008;
- – at the level of 2022, there are about 80 fintech companies on the Estonian market;
- – around 2.41% of the population own cryptocurrencies;
- – ICOs are not subject to VAT or income taxes.
If you decide to create and launch an ICO in Estonia, feel free to request our company registration services.