Estonia used to be known as one of the most crypto-friendly nations in the world, embracing the assets in their early stages. However, a series of unfortunate events appears to have soured the government’s relationship with the industry.
This week, local news source ERR News reported that the Estonian Ministry of Finance is looking to implement more stringent crypto licensing regulations. The news source explained that the Finance Ministry had issued draft legislation to tighten rules on the crypto industry back in January.
As part of the new rules, the Finantsinspektsioon — Estonia’s Financial Supervisory Authority – will take the country’s crypto industry’s reins and oversee all companies in the space. The agency will be taking over the responsibility from the Financial Intelligence Unit, the hitherto regulator.
Henceforth, all crypto firms looking to operate in the Eastern European country will need to pay licensing fees to the Finantsinspektsioon. The country already has 381 licensed companies, all of whom will need to reply for the new regulator’s permits.
Erki Peegel, a spokesperson for the finance ministry, explained to ERR News that the government policy does not have anti-crypto undertones. However, given that regulatory rule changes have recently been passed, there is a significant chance that several existing companies will be forced to close their doors soon.
A Messy Divorce
The Estonian government has already been on a trend of implementing some harmful regulatory policies. Following a $220 billion money-laundering scandal in the country, the government revoked 500 crypto companies’ licenses last June.
At the time, Bloomberg reported that the government had cause to believe that licensed crypto firms had assisted the Estonian unit of Danske Bank A/S – Denmark’s largest lender – to facilitate its money-laundering operation.
Madis Reimand, Head of the FIU, explained that regulators were incredibly skeptical about the crypto space. As such, 500 companies – about a third of the country’s total crypto firm count – that had failed to start operating in the country within six months of getting their licenses would be banished.
“This is a first step in tidying up the market, allowing us to take care of the most urgent issues by permitting operations only for companies that can be subjected to Estonian supervision and coercive measures.”
Reinard had indicated that stricter regulations would come in Estonia’s crypto space. The government kept its word, revoking the licenses of another 1,000 firms in the country in December. Per a report from news source Postimees, the FIU conducted the purge in response to the “significant risks” that it had seen in the industry.
Veiko Tali, the Deputy Secretary-General of the Government Committee for the Prevention of Money Laundering and Terrorist Financing, explained that the government was committing to monitoring new technologies in the country and managing money laundering risks. By engaging in the mass license revocation, it was essentially tidying up its crypto market.