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On Estonia's New Legal & Licensing Requirements for Crypto Institutions

Apr 8·1 min read

On September 3, 2018, the Nexo Group’s Estonian entity Nexo Services OÜ received licensing to operate as a financial institution and offer exchange and wallet services by the relevant Estonian regulating body. By virtue of amendments to Estonian legislation in 2020, all license holders were required to comply with newly adopted requirements — including, among others, having a local AML officer, an office in Estonia, minimum capital requirements — and to file a application for existing licenses to be merged into a new combined license for a virtual currency service provider.

The legislative amendments were enacted by the Estonian parliament “due to the burden of monitoring compliance,” as reported by NASDAQ, and affected many of the licensees in this jurisdiction, with over 1000 out of a total 1400 crypto companies — including industry leaders such as Binance and Nexo — having their licenses archived.

Complying with the newly adopted requirements under the Estonian legislation, Nexo Services OÜ has filed an application to obtain a license renewal as a virtual currency service provider, which, along with hundreds of other crypto companies’ license renewal applications, is currently pending before the regulator.

Nexo’s business practices are confirmed with regards to compliance with the respective regulatory frameworks by the top-tier legal firms we partner with around the world. Our primary services of lending and earning on digital currencies are not currently subject to licensing in Europe and are compliantly provided through various companies from the Nexo Group, as well as third-party service providers, which possess all required licenses and/or authorizations to conduct business compliantly in the EU and worldwide.

The mechanism that guarantees Nexo’s compliance with respect to fiat transactions within the EU is used by the majority of compliant crypto companies: When topping up EUR balances, funds are automatically used to mint the top-up amount's EUR equivalent in EURx stablecoin with a guaranteed 1-to-1 conversion rate to EUR. Compounding interest is then accrued on the EURx stablecoin balance. Upon receipt of a EUR withdrawal request, the EUR equivalent of EURx stablecoin is automatically burnt, with the client’s EUR balance sent to the client’s bank account as designated in the withdrawal request.

As a company of cutting-edge FinTech solutions, it is Nexo’s firm belief that through its presence in a particular jurisdiction, it greatly improves the innovative entrepreneurial environment and adds value on multiple layers. We remain optimistic that in the instance of Estonia, the regulator’s actions are not an attempt to stifle innovation but part of a larger plan for more efficient regulatory oversight over crypto companies.

In the meantime, and while ensuring full compliance internationally, Nexo will support and promote the implementation of legislation and regulation that accommodates and fosters innovation in our bid to pave the way for mass crypto adoption in a secure, compliant and customer-oriented manner. In doing so, we will continue to contribute to the economies we operate in and toward the building of a stronger and fairer financial system globally.

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