Estonia will enforce new rules against money laundering that will make it more difficult for cryptocurrency companies to operate under Estonian licences. The changes come amid concerns that Russia may use crypto to evade western sanctions and an ongoing audit of the Baltic nation’s AML policies.
Government of Estonia creates a more restrictive regulatory environment for cryptocurrency businesses
Estonian banks have been involved in the processing and payment of millions of money for Russian clients. Estonia now seeks to eliminate these loopholes.
Next Tuesday, the country’s amended Money Laundering and Terrorist Financing Prevention Act will enter into force, introducing stringent standards. Crypto companies are going to bear the brunt of Estonia’s war against dirty money, Politico notes in a report.
This update will bring the Estonian regulation regime for digital asset platforms even more strict than those of the EU. It was deemed too permissive because it permitted hundreds of businesses to apply for licensing in Estonia, despite being based all over the world.
Keit Pentus – Rosemannus, the Minister of Finance spoke to the publication. While he stated Estonia’s openness to innovation was important, he also stressed the fact that Estonia would not tolerate financial crimes and that money laundering will remain a top priority. He also commented on:
It was impossible to supervise. They operated under an Estonian licence, but that was not a problem. This is one of the things that were changed in law.
Estonian officials are trying to restrict companies’ access to its crypto-space. Entities offering digital wallet and online exchange services will have to meet a minimum capital requirement in the amount of €100,000 ($109,000) and those providing custodial services will need to show at least €250,000.
New legislation will increase registration fees and require stricter due diligence. It also requires more regulatory scrutiny. Additionally, the new legislation will require crypto companies to have a physical presence in the country.
Tallinn is tightening crypto oversight amid an ongoing audit of the country’s safeguards against illicit financial flows conducted by the Council of Europe’s Committee of Experts on the Evaluation of Anti-Money Laundering Measures and the Financing of Terrorism (Moneyval).
The task of the auditors, which will be completed in December, is to examine digital asset regulations and other policies. The stakes are high for Estonia as the Baltic nation may end up on a “gray list,” alongside Malta, another small EU member state that tried to become a crypto-friendly destination.
The Estonian government is hardening its approach despite policy makers in Brussels still considering EU’s Markets in Crypto Assets (MiCA) proposal. What’s more, the European standards are expected to be less stringent than the new Estonian regulations. Capital requirements for crypto service providers, as proposed by the European Commission, range between €50,000 and €150,000.
What do you think the chances are that many Estonian crypto companies will move to other countries after Estonia implements stricter regulations. Please leave your comments below.
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