Estonia’s government has given the green light to a bill aimed at regulating cryptocurrency service providers, as reported by state media. However, the bill still awaits approval through a parliamentary vote.
If passed, the bill would place cryptocurrency service providers under the supervision of the Financial Supervision Authority (FSA). Currently, these providers are overseen by the Financial Intelligence Unit (FIU) and must adhere to Anti-Money Laundering (AML) regulations. The FSA is set to commence issuing licenses in 2025, with existing FIU license holders required to apply for FSA licensing by the end of that year.
Estonian Finance Minister Mart Võrklaev expressed confidence in the process, stating, “I believe that anyone who takes this seriously and wishes to provide a service will also be able to obtain a new license from the Financial Supervisory Authority.”
Stricter Penalties and Conformity with EU Regulations
The proposed legislation introduces stricter penalties for AML violations, with fines potentially reaching up to 5 million euros ($5.2 million). Moreover, the bill aligns Estonia with the European Union’s Markets in Crypto-Assets (MiCA) regulations.
Additionally, the bill aims to modify the securities prospectus requirement. Previously, companies seeking to raise capital exceeding 5 million euros were obligated to prepare a detailed prospectus. However, under the new law, this threshold would be raised to 8 million euros ($86.9 million), streamlining the process for businesses.
Estonia’s Crypto Journey
Estonia established itself as crypto-friendly in 2017, offering favorable regulations for crypto firms and facilitating easy registration, including through e-residency. However, the country tightened its stance on crypto in 2020 following a non-crypto-related corruption scandal.
In response, Estonia revoked 500 FIU-issued crypto company licenses in 2020 for failing to commence operations within six months of registration. This crackdown led to a significant decrease in licensed crypto firms, dropping from 1,234 at the end of 2019 to 353 by September 2020.
Subsequent measures included considerations to revoke all crypto company licenses in October 2021, as well as the imposition of stricter AML requirements by the end of 2021. As a result of these regulatory changes, nearly 400 virtual asset providers were either shuttered or voluntarily closed after the law was amended in 2023.
