The government has approved a bill to regulate cryptocurrency service providers, a significant development for Estonia’s cryptocurrency landscape. This decision marks a crucial step towards comprehensive oversight of the burgeoning crypto sector within the country. However, the bill’s journey to becoming law hinges on a successful parliamentary vote.
Supervision by the Financial Supervision Authority (FSA)
Under the proposed legislation, cryptocurrency service providers would fall under the supervision of the Financial Supervision Authority (FSA), a move designed to bolster regulatory oversight and enhance accountability within the industry. Currently, these providers operate under the purview of the Financial Intelligence Unit (FIU) and must adhere to Anti-Money Laundering (AML) regulations.
If the bill receives parliamentary approval and is enacted into law, the FSA will commence issuing licenses to cryptocurrency service providers starting in 2025. Existing FIU license holders will face a transition period, being required to apply for FSA licensing by the end of that year. Estonian Finance Minister Mart Võrklaev expressed confidence in the licensing process, emphasizing that serious service providers can obtain the requisite licenses from the Financial Supervisory Authority.
Heightened penalties for AML violations
One notable aspect of the proposed legislation is the introduction of substantially increased fines for Anti-Money Laundering (AML) violations. While the current national law allows fines of up to 40,000 euros ($43,450), the new bill could see penalties soar to as high as 5 million euros ($5.2 million). This significant escalation underscores Estonia’s commitment to combating financial crimes and ensuring strict adherence to cryptocurrency regulations.
The bill aims to align Estonia with the European Union’s Markets in Crypto-Assets (MiCA) regulations, a move that seeks to harmonize regulatory frameworks across member states. Furthermore, the proposed legislation would modify the securities prospectus requirement, reflecting Estonia’s proactive approach towards regulatory evolution in line with broader European directives.
Estonia’s crypto-friendly evolution
Estonia first positioned itself as a crypto-friendly jurisdiction in 2017, enacting legislation that facilitated the establishment and operation of cryptocurrency companies while streamlining registration processes, including introducing e-residency. However, the country implemented tighter regulations in 2020 following a non-crypto-related corruption scandal, signaling a shift towards a more cautious regulatory stance.
As Estonia progresses towards implementing comprehensive regulation for cryptocurrency service providers, stakeholders across the industry await the outcome of the forthcoming parliamentary vote with keen interest. With the potential for heightened penalties and closer supervision by the Financial Supervision Authority, the proposed legislation underscores Estonia’s commitment to fostering a robust and compliant cryptocurrency ecosystem while aligning with evolving European regulatory standards.
