The Estonian government has given approval for a bill that aims to regulate cryptocurrency service providers. The bill must still pass a parliamentary vote before it can become law. If passed, the legislation would place these service providers under the supervision of the Financial Supervision Authority (FSA). Currently, cryptocurrency service providers are registered by the Financial Intelligence Unit (FIU) and must adhere to Anti-Money Laundering (AML) rules.
Under the proposed law, the FSA would begin issuing licenses to cryptocurrency service providers in 2025. Existing holders of FIU licenses would need to apply for FSA licensing before the end of that year. Estonian Finance Minister Mart Võrklaev expressed his belief that those who are serious about providing cryptocurrency services will be able to obtain the necessary license from the FSA.
The new legislation would significantly increase the fines for AML violations. Currently capped at 40,000 euros ($43,450), fines could reach up to 5 million euros ($5.2 million) under the proposed law. Võrklaev has already submitted the bill to the government, and it must receive approval from the government before it can be presented to the Riigikogu, Estonia’s unicameral parliament, for a vote.
The bill aims to bring Estonia in line with the European Union’s Markets in Crypto-Assets (MiCA) regulations and also seeks to change the securities prospectus requirement. Previously, companies looking to raise capital through shares or bonds worth more than 5 million euros were required to prepare a detailed prospectus. The new law would raise the threshold to 8 million euros ($86.9 million), making it less burdensome for companies to raise funds.
Estonia has positioned itself as a crypto-friendly jurisdiction since 2017, when it introduced legislation with favorable conditions for cryptocurrency firms and streamlined registration processes, including e-residency. The country tightened regulations around crypto companies in 2020 following a corruption scandal unrelated to the cryptocurrency industry. In response, Estonia revoked 500 licenses issued by the FIU to crypto companies that had failed to commence operations within six months of registration.
As a result of increased scrutiny and regulatory changes, the number of licensed crypto firms in Estonia decreased significantly from 1,234 at the end of 2019 to 353 in September 2020. The FIU considered revoking all crypto company licenses in October 2021 and imposing stricter AML requirements. By 2023, almost 400 virtual asset providers had either shut down or closed voluntarily following amendments to the law.
This bill is just another example of governments feeling threatened by cryptocurrency and trying to control it. It’s a shame.
Stricter AML requirements will serve as a deterrent for money laundering and ensure that the crypto industry remains a clean and transparent space. 🛡️