The new bill has been approved by the government and is due to be voted on in Parliament

Estonian authorities will oblige crypto firms to obtain a license from the financial regulator

22.03.2024 - 08:30

105

3 min

What’s new? The Estonian government has approved a bill to regulate cryptocurrency service providers. According to it, industry companies will be supervised by the Financial Supervisory Authority (FSA) from 2026. Currently, companies are only required to register with the Financial Intelligence Unit (FIU) and comply with anti-money laundering (AML) regulations. Under the new law, FUI license holders must apply for FSA licenses by the end of this year, with issuance to begin in 2025.

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What else is known? According to the current Estonian legislation, fines for violations of AML rules reach 40 000 EUR, the new draft law proposes to increase fines up to 5 million EUR. Once approved by the government, the bill will be sent to the Riigikogu, Estonia’s unicameral parliament, for a vote.

It aims to bring local legislation in line with the EU-wide Markets in Crypto Assets (MiCA) regulations, which will fully come into force on December 30, 2024.

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Estonia previously positioned itself as a cryptocurrency-friendly country, with local authorities passing legislation in 2017 with favorable laws and easy registration for the industry, including e-residency. However, already in 2020, the situation changed after a corruption scandal unrelated to cryptocurrencies.

At that time, the FUI revoked the licenses of 500 crypto firms that had still not started operations in the country six months after registration. A months-long survey of activity in the industry saw the number of licensed firms drop from 1234 at the end of 2019 to 353 in September 2020.

In October 2021, the FUI considered revoking the licenses of all crypto firms and re-licensing the business. At the end of 2021, it introduced stricter AML requirements. Since the act was amended in 2023, many virtual asset service providers have been shut down or voluntarily decided to cease operations, and their numbers have fallen by 80%.

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Estonian Finance Minister Mart Võrklaev expressed confidence after the government approved the new bill that “anyone who takes this seriously and wishes to provide a service will also be able to obtain a new license from the Financial Supervisory Authority.”

FUI head Matis Mäeker explained that the changes will put crypto firms under real financial oversight. “Before, they were only dealing with AML claims, which is a problem. They are taking customers’ assets, similar to banks taking deposits and doing something with that money. They have to store that money and ensure that it is returned to the user on demand,” the official concluded.

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