Estonia’s Stricter Crypto Regulations: Crackdown on Non-Compliant Firms
Estonia, a small yet tech-savvy nation, has been in the news for its crackdown on crypto firms that failed to meet their new anti-money laundering. And terrorist financing laws that came into effect in March. Estonia shuts down almost 400 virtual asset service providers (VASPs) have been shut down or had their authorizations revoked.
The enhanced laws were introduced in response to the discovery of $235 billion worth of illicit capital laundered through the Estonian branch of Denmark megabank Danske Bank in 2018. Require legitimate links to Estonia, increased licensing fees, and capital and information reporting requirements.
The 400 Virtual Asset Service introduce the Financial Action Task Force Travel Rule, which mandates VASPs to identify. And share the identities of both the sender and recipient of any transaction over $1,000.
The new laws have put a squeeze on crypto firms in Estonia, but they’re necessary to protect the country’s reputation as a safe and secure place to do business as a member of the European Union. Estonia will also have to implement the upcoming markets in Crypto-Assets (MiCA) laws. Which are set to come into effect in early 2025.
These laws will subject crypto firms to stringent AML and terrorism prevention requirements, making it even more important for VASPs to comply with regulations.
Impact on Estonia’s Crypto Landscape
The issues identified by Estonia’s Financial Intelligence Unit (FIU) are not unique to Estonia, and they highlight the importance of proper due diligence when dealing with cryptocurrency. Some of the issues the FIU found included misleading company information. Registered board members and company contacts unbeknownst to the actual individuals themselves, and falsified professional backgrounds on resumes.
It’s also concerning that many companies had copied and pasted identical business plans from each other. Which were found to be lacking any logic or connection with Estonia.
The crackdown on crypto firms in Estonia is a reminder that the industry is still largely unregulated. And that bad actors can take advantage of the lack of oversight.
However, it’s also an opportunity for legitimate crypto firms to differentiate themselves and gain the trust of their customers. And regulators by complying with regulations and implementing best practices.