The cryptocurrency landscape in Estonia is set for a significant change as the government has given its approval to a bill that will regulate cryptocurrency service providers. This decision marks an important milestone in the country’s efforts to oversee the growing crypto sector. However, the bill’s journey to becoming law hinges on a successful vote in parliament.
Under the proposed legislation, cryptocurrency service providers will come under the supervision of the Financial Supervision Authority (FSA). This move is aimed at strengthening regulatory oversight and increasing accountability in the industry. Currently, these providers operate under the oversight of the Financial Intelligence Unit (FIU) and must comply with Anti-Money Laundering (AML) regulations.
If the bill is approved by parliament and becomes law, the FSA will start issuing licenses to cryptocurrency service providers from 2025 onwards. Existing FIU license holders will have a transition period and will be required to apply for FSA licensing by the end of that year. Estonian Finance Minister Mart Võrklaev expressed confidence in the licensing process, stating that reputable service providers can obtain the necessary licenses from the Financial Supervisory Authority.
One notable aspect of the proposed legislation is the introduction of significantly higher fines for AML violations. While the current law allows fines of up to 40,000 euros ($43,450), the new bill could see penalties increase to as much as 5 million euros ($5.2 million). This substantial increase highlights 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, which seek to harmonize regulatory frameworks across member states. Additionally, the proposed legislation will modify the requirements for securities prospectuses, reflecting Estonia’s proactive approach to regulatory evolution in line with broader European directives.
Estonia has been positioning itself as a crypto-friendly jurisdiction since 2017 when it enacted legislation to facilitate the establishment and operation of cryptocurrency companies. This included streamlining registration processes and introducing e-residency. However, the country implemented stricter regulations in 2020 following a corruption scandal unrelated to cryptocurrencies, signaling a shift towards a more cautious regulatory approach.
As Estonia moves closer to implementing comprehensive regulation for cryptocurrency service providers, industry stakeholders are eagerly awaiting the outcome of the forthcoming parliamentary vote. With the potential for higher penalties and closer supervision by the Financial Supervision Authority, the proposed legislation demonstrates Estonia’s commitment to fostering a strong and compliant cryptocurrency ecosystem while aligning with evolving European regulatory standards.