Proposed Estonian Legislation Outlines Regulations for Crypto Service Providers

Reports from state-run media indicate that the Estonian government has approved a bill aimed at regulating cryptocurrency service providers, pending a parliamentary vote.

The bill mandates that these providers fall under the oversight of the Financial Supervision Authority (FSA), a departure from the current system where they are registered and regulated by the Financial Intelligence Unit (FIU) solely for compliance with Anti-Money Laundering (AML) regulations. According to Estonian Finance Minister Mart Võrklaev, obtaining a license from the FSA will become a prerequisite for serious service providers, as the authority will begin issuing licenses in 2025. Existing FIU license holders will be required to transition to FSA licensing by the end of that year.

Notably, the proposed legislation introduces stiffer penalties for AML violations, with fines potentially reaching up to 5 million euros, a significant increase from the previous cap of 40,000 euros.

Võrklaev recently submitted the bill to the government, pending translation into English, before it proceeds to the Riigikogu for further consideration.

In alignment with the European Union’s Markets in Crypto-Assets (MiCA) regulations, the bill seeks to adapt Estonia’s regulatory framework. Additionally, it adjusts the securities prospectus requirement, raising the threshold for companies seeking capital through shares or bonds to 8 million euros, streamlining the process previously deemed slow and costly.

Estonia, known for its crypto-friendly stance since 2017, underwent regulatory tightening in 2020 following a corruption scandal unrelated to the crypto sector. This led to the revocation of hundreds of FIU-issued licenses for crypto companies that failed to commence operations within the mandated timeframe. Subsequent amendments to AML laws in 2023 resulted in the closure of nearly 400 virtual asset providers either by force or voluntarily.