Estonia Enacts New Regulations for Cryptocurrency Service Providers

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Key Takeaways

  • The law introduces stricter operational and reporting standards, with potential fines reaching €5 million.
  • The bill aligns Estonia with the European Union’s Markets in Crypto-Assets (MiCA) regulations

Estonia has recently passed a bill aimed at imposing stringent regulatory measures on digital asset service providers, marking a significant step towards regulating and fortifying the cryptocurrency industry in the country.

The legislation, endorsed on March 20, underscores Estonia’s endeavor to establish legal requirements for cryptocurrency service providers to enhance market reliability. It mandates that such companies will come under the oversight of the Financial Supervision Authority (Finantsinspektsioon) starting from 2026.

Estonia has been a favored destination for cryptocurrency service providers, with estimations suggesting that nearly half of the world’s crypto service businesses were registered there by 2021. However, regulatory efforts by the Financial Intelligence Unit (Rahapesu Andmebüroo/RAB) have considerably reduced this number to around 50 by 2024.

The new legislation signals a shift in supervision, as cryptocurrency service providers will now be subject to financial oversight for the first time, falling under the purview of the Financial Supervision Authority (FSA) starting in 2026.

The bill imposes stricter operational and reporting requirements on cryptocurrency enterprises, with fines of up to €5 million, a significant escalation from the previous cap of €40,000 under the Anti-Money Laundering Act.

Moreover, the law necessitates crypto service providers to obtain regulatory licenses, which the FSA will commence issuing from 2025 onwards. Companies holding current licenses from the Financial Intelligence Unit (FIU) are mandated to apply for new licenses by 2026.

Finance Minister Mart Võrklaev expressed confidence in the regulatory framework, affirming that serious service providers will be able to obtain licenses from the Financial Supervisory Authority. The bill aligns Estonia with the European Union’s Markets in Crypto-Assets (MiCA) regulations and modifies the securities prospectus requirement, raising the threshold for detailed prospectus preparation to €8 million.

The bill, which is yet to be translated into English, has been forwarded to the government for approval before it is presented to the Riigikogu, the Estonian parliament, for voting.

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Saniya Raahath
Saniya Raahath

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