Tighter Crypto Controls on the Horizon for Estonia

Estonia is on the brink of adopting stricter regulations for cryptocurrency service providers, pending a parliamentary vote. The bill, recently approved by the government, proposes placing these providers under the Financial Supervision Authority (FSA)’s watchful eye. Currently the Estonian market is regulated by the Financial Intelligence Unit (FIU) and adhering to Anti-Money Laundering (AML) guidelines, and the move to FSA oversight is a big one. With licensing set to commence in 2025, entities holding FIU licenses must secure FSA approval by year’s end.

Finance Minister Mart Võrklaev stands behind the forthcoming changes, assuring that diligent service providers will successfully navigate the licensing hurdles. “Those who are serious about providing services will be able to obtain the necessary licenses from the Financial Supervisory Authority,” he stated, reflecting the government’s commitment to a seamless transition.

This legislative shift could also usher in harsher penalties for AML breaches. Where fines currently max out at 40,000 euros, the new bill could escalate penalties to as much as 5 million euros. This dramatic increase underscores Estonia’s resolve to fortify its financial system against misuse.

The move aligns with broader European efforts, notably the European Union’s Markets in Crypto-Assets (MiCA) regulations, aiming to standardize crypto oversight across member states as it also takes aim at anonymous crypto transactions. Additionally, the bill proposes amendments to the securities prospectus requirement, further integrating Estonia’s legal framework with EU standards.

Having first positioned itself as a haven for crypto enterprises in 2017, Estonia simplified the business landscape for blockchain companies, attracting a wave of digital innovation. Yet, in the wake of a non-crypto corruption scandal in 2020, the nation began to reconsider its regulatory stance, tightening controls to prevent future abuses.