• Estonia has implemented a law requiring crypto firms to have hefty capital reserves and genuine links to the country.
• As a result, the number of registered firms in Estonia dropped by 80%.
• The Financial Intelligence Unit found “suspicious circumstances” when assessing applications.
Estonia’s Crypto Law
Estonia has introduced a new law that requires companies operating in its crypto sector to keep hefty capital reserves and establish genuine links with the nation. This requirement was established by the Financial Intelligence Unit (FIU), which is charged with implementing the 2022 legislation.
Results of Law
This law has had an immediate effect on the industry, leading to around 200 licenses being withdrawn by firms themselves and around 200 being rejected by FIU due to suspicious behavior detected during their assessment process. Examples of this include individuals being appointed as board members without their knowledge or using falsified credentials, as well as identical documents being used between different companies due to them all using the same cluster of legal and professional services firms.
The implementation of this law follows a scandal involving money laundering through Tallinn’s branch of Danske Bank, which led international standard-setters Moneyval to conduct an evaluation on Estonia’s anti-money laundering efforts. This evaluation revealed that further work needs to be done in order for compliance with EU regulations such as Markets in Crypto Assets (MiCA).
Returning To Normality
Matis Mäeker, Director of FIU, stated that they will now be able to return to normal practice where they will move away from assessments on paper towards daily supervision on-site. He also stated that this law will professionalize the crypto sector.
In conclusion, while it may seem harsh at first glance, Estonia’s new crypto law is intended to increase security within its digital economy and establish itself as a safe haven for financial technology companies looking for legitimacy within Europe’s regulatory framework. With FIU now returning back to business-as-usual monitoring after money laundering fears had led it take a tough line against noncompliant businesses, we can expect more developments from Estonia in the coming months when it comes to protecting its citizens from malicious actors within its digital space.