The Estonian government has reportedly given its approval to a bill aimed at regulating cryptocurrency service providers, as reported by state-run media. However, the bill still needs to pass a parliamentary vote before becoming law.
Under the proposed legislation, cryptocurrency service providers would be placed under the supervision of the Financial Supervision Authority (FSA). Currently, these providers are registered under the Financial Intelligence Unit (FIU) and are required to adhere to Anti-Money Laundering (AML) regulations. The FSA will begin issuing licenses in 2025, and those who currently hold FIU licenses will need to apply for FSA licensing by the end of that year. Estonian Finance Minister, Mart Võrklaev, commented that under the current national law, fines for AML violations are capped at 40,000 euros ($43,450). However, the new legislation would allow for fines of up to 5 million euros ($5.2 million).
Võrklaev announced that he submitted the bill to the government last week, though it has not yet been translated into English. The bill must first gain approval from the government before it can move on to the Riigikogu, the Estonian parliament, for a vote.
This new bill is intended to align Estonia with the European Union’s Markets in Crypto-Assets (MiCA) regulations. It would also alter the requirement for securities prospectuses. Previously, companies seeking to raise capital through shares or bonds worth more than 5 million euros had to prepare a detailed prospectus, which was a time-consuming and costly process. However, under the new legislation, the threshold would be raised to 8 million euros ($86.9 million).
Estonia positioned itself as a cryptocurrency-friendly jurisdiction in 2017 when it enacted legislation with favorable laws for crypto companies and easy registration, including e-residency. However, in 2020, the country cracked down on these firms following an unrelated corruption scandal. As a result, 500 crypto company licenses issued by the FIU were revoked for failing to launch operations within six months of registration. The number of licensed crypto firms in Estonia dropped from 1,234 at the end of 2019 to 353 by September 2020, after facing increased scrutiny from law enforcement agencies. In October 2021, the FIU considered revoking all crypto company licenses and reintroducing licensing procedures. Stricter AML requirements were implemented at the end of 2021, leading to the closure of nearly 400 virtual asset providers through shutdowns or voluntary closures after the law was amended in 2023.
Overall, the bill to regulate cryptocurrency service providers in Estonia represents the country’s continued efforts to adapt its regulatory framework to align with international standards and protect against money laundering and other illicit activities in the cryptocurrency industry.