The Estonian government has approved legislation designed to improve oversight of its rapidly growing crypto industry due to favorable regulations and the business climate. The new law, which has yet to be passed, will introduce stricter requirements for service providers without preventing their customers from owning or trading cryptocurrencies.
Tallinn authorities develop stricter rules for crypto service providers
The executive branch in Estonia has prepared and approved a bill designed “to more effectively regulate virtual asset service providers (VASPs)”. The main objective, the finance ministry explained on Sunday, is to mitigate the risk of financial crime through crypto platforms registered and operating out of the Baltic nation.
The new regulations, which come in the form of a revised bill submitted to the Estonian parliament, require VASPs to identify their customers in order to link them to their transactions. The regulations extend the ban on opening anonymous virtual accounts introduced in 2020 after Estonian crypto-friendly regulations attracted large numbers of license applicants.
The finance ministry stressed that the legislation will not affect people who own virtual currency through a private wallet that is not provided by a VASP. It does not prohibit customers from holding and trading virtual assets, and does not require them to share the private keys of their crypto wallets. At the same time, Estonian service providers will not be allowed to offer anonymous accounts or wallets.
The ministry stressed that the measures are similar to the rules applied to payments and banking transactions. The amendments transpose the recommendations issued by the Financial Action Task Force on Money Laundering (FATF) into Estonian law. These define certain virtual asset services which are not defined in the current legislation of Estonia.
Estonia to increase capital requirements for crypto licensees
An important aspect of the new regulation is the obligation for companies to operate or be connected to Estonia in order to obtain its licenses. The surge in demand was largely due to the current rules allowing resale to third parties of companies licensed by Estonia. Supervision of these entities has proved impractical and the authorities noted that under the new rules, the country’s Financial Intelligence Unit (FIU) will be able to refuse such requests.
In addition, regulators will increase the share capital requirements for VASPs from € 12,000 to € 125,000 or € 350,000, depending on the type of service. The Estonian government hopes that the threshold will reduce the number of dormant entities. The finance ministry also said that the average annual turnover of licensed VASPs is now around 80 million euros.
Estonia announced it was working on the new legislation in October, when FIU chief Matis Mäeker revealed in an interview that only one in 10 licensed crypto firms had a bank account in the country, adding that the regulator was considering revoking all previously issued companies. licenses to restart authorization. By that time, the agency had revoked around 2,000 licenses for providers of virtual asset services such as crypto exchanges and wallet operators.
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