Estonia’s dilemma: Why the Country loves Blockchain but Fights Crypto

Estonia’s dilemma: Why the Country loves Blockchain but Fights Crypto
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 Estonia seems to be all in for the ease of operations that blockchain offers, yet the country’s regulations are getting tougher on the crypto sector. With Estonian authorities, the digital currency rave is only half-hearted, but it hasn’t always been so. At the time when cryptocurrencies only represented a safe haven investment at most, and a medium of easier digital transactions for a lot more, Estonia, and the rest of the world, took a laissez-faire approach to regulate digital currencies.

In fact, the Estonian government contemplated launching its own digital currency, Estcoin, and only abandoned the effort because the European Central Bank President, Mario Draghi, was not in support of the initiative.

However, with the increasing adoption of cryptocurrency globally, there have been proportionally increasing regulations implemented by several countries to curb the use of the digital assets for crime, especially terrorism financing and money laundering.

In November 2018, after the European Union (EU) implemented its 4th Money Laundering Prevention Directive, and Estonia launched a new version of their Anti-Money Laundering (AML) and Terrorist Financing Prevention Act. The Act clearly stepped up regulations for “virtual currency exchange service providers” and “virtual currency payment service providers”, which were previously merely referred to as “alternative means of payment service providers.”

After the 2018 clampdown, Estonia continued to tighten regulations on cryptocurrency exchanges in the country. In May 2019, the Estonian Ministry of Finance introduced stricter processes for securing a crypto license in the country for bitcoin trading. The new regulations included a numbered formal obligation for dealing in virtual currencies and an extension of the application processing time from 30 to 90 days. The Estonian government made it necessary for all crypto-exchange companies to incorporate a branch in Estonia—rules that were never heard of before in the Northern European country.

Also, Estonian authorities increased the state fee for the procurement of crypto licenses from €345 ($386) to €3,330 ($3,729). Current license holders were reportedly given until the end of the year to fulfill the new requirements, or risk having their licenses revoked. It all seems like a full-out mission to actively cut the growth of the cryptocurrency sector in the country short, and watchfully monitor the activities of existing crypto ventures.

“We have learned our lesson from the banking sector the hard way, and we must now deal with new international risks, with cryptocurrencies among the most urgent of these,” Estonian Minister of Finance, Martin Helme noted about the changes.

However, Estonia is fully maximizing the potentials of blockchain for simplifying traditional processes. The country has been actively applying blockchain technology in vital services and administrations, including its health sector and voting services. In 2016, Estonian authorities, in partnership with US data system provider Guardtime, announced an initiative to apply blockchain for managing patient’s healthcare records.

Estonia also applies blockchain tech in their e-residency programs, in a bid to ensure ultimate integrity and transparency of records. A Ukrainian delegation visited Estonia recently, with the purpose of learning about the country’s e-government concept. The delegation was led by an advisor to Ukrainian president Mikhail Fyodorov, who had nothing but admiration for Estonia’s e-voting service, which reportedly registered a 99% success rate. Fyodorov stated that Ukraine is emulating the country, and plans to employ the blockchain for running the government.

Ukraine’s visit to Estonia, if anything, is ample proof that the country is exploiting blockchain alright, but with Estonia’s stiff regulations regarding crypto trading, it is evident that the country is quietly fighting the growth of the sector.

About Jimmy Aki

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Jimmy has been following the development of blockchain for several years, and he is optimistic about its potential to democratize the financial system.