Estonia Enacts Tighter Regulations for Crypto Service Providers

Estonia flag and crypto coins

Estonia, known as one of the world’s most sophisticated technological societies, is strengthening its hold on the Bitcoin industry. The government has adopted a measure that would require bitcoin service providers to report to the country’s Financial Supervision Authority beginning in 2026.

Estonia is Taking the Reins

Estonia’s desire to increase regulation of the cryptocurrency business has been known for more than two years. Now that the Financial Intelligence Unit (FIU) is redoubling its attempts to regulate crypto firms, they will be required to conform to standards comparable to those used by banks.

According to Matis Mäeker, the head of the FIU, these new laws would bring these firms “under real financial supervision.” According to the enforcer, the minimal need to follow solely anti-money laundering regulations made it possible to hurt customers in the long run. This was the case for numerous bankruptcies and cyberattacks in the little country.

The new legislation strengthens operating and reporting requirements, with potential fines of up to €5 million. This is a significant rise above the previous €40,000 ceiling that firms might incur under the Anti-Money Laundering Act. The Financial Supervisory Authority is anticipated to begin granting licenses in 2025, one year before the new legislation goes into effect. Companies that fail to comply and receive the necessary permits will be unable to operate in the nation.

Estonia’s Regulatory Journey

Estonia’s regulatory path in the cryptocurrency sphere began in 2018 when the European Union (EU) adopted the Fifth Anti-Money Laundering Directive (AMLD5). This decision came in reaction to the Danske Bank incident, which resulted in the financial institution losing more than $2 billion.

AMLD5 imposed anti-money laundering (AML) and know-your-customer (KYC) rules on cryptocurrency exchanges and wallet providers throughout the EU. This was intended to prevent Russian money from going through the European financial system as the government attempted to avoid sanctions.

Estonia amended the Money Laundering and Terrorist Financing Prevention Act in March 2020, placing cryptocurrency-related activities under the FIU’s jurisdiction. These revisions require compliance with AML standards, due diligence, and KYC processes, all of which have become standard for other financial institutions. Subsequent regulatory proceedings resulted in the revocation of licenses for over 1,000 cryptocurrency enterprises by the end of 2020. Regulators determined that many registered cryptocurrency firms were inactive, raising worries about Estonia’s image as an offshore haven and the potential for economic losses.

Author: Simeon

Simeon is a seasoned crypto writer with a passion for exploring the fascinating world of blockchain and digital currencies. With a background in finance and technology, Simeon brings a unique perspective to his writing, delving into the complexities of decentralized finance, cryptocurrency trading, and emerging blockchain projects.