Estonia is preparing to enforce a series of new anti-money laundering rules that will tighten requirements for crypto companies operating under Estonian license. The changes come amid concerns that Russia could use crypto to evade Western sanctions and an ongoing scrutiny of the Baltic nation’s AML policies.
Estonian government creates stricter regulations for crypto companies
Estonia, whose banking sector has historically been involved in processing billions for suspicious Russian customers, is now taking steps to close loopholes that could allow Russia, its elites and allied Belarus to evade sanctions imposed on them. imposed after the invasion of Ukraine.
Next Tuesday, the amended Money Laundering and Terrorist Financing Prevention Act will come into force, introducing stricter standards. Crypto firms will bear the brunt of Estonia’s war on black money, Politico said in a report.
The update will make Estonia’s regulatory regime for platforms working with digital assets even stricter than the upcoming EU rules. The framework adopted in 2017 was considered too broad as it allowed hundreds of companies, many of them located elsewhere, to obtain licenses from Estonia.
Speaking to the publication, Finance Minister Keit Pentus-Rosimannus emphasized that Estonia welcomes innovation, but emphasized that it will not tolerate financial crime and will uphold the prevention of money laundering as a priority. He further noted:
Surveillance just wasn’t possible. But the risk was for us because they were operating with an Estonian license. That is one thing that has changed with the law.
Authorities in Estonia are planning to make it more difficult for companies to join their crypto space. Entities offering digital wallet and online exchange services must meet a minimum capital requirement of €100,000 ($109,000) and those offering custodial services must be able to show at least €250,000.
The new legislation will also introduce higher registration fees, stricter due diligence obligations and stricter regulatory oversight. In addition, unlike before, crypto companies will have to maintain a presence in the country.
Tallinn is stepping up surveillance over cryptocurrencies during an ongoing audit of the country’s safeguards against illicit financial flows conducted by the Council of Europe’s Committee of Experts for the Review of Anti-Money Laundering and Terrorist Financing Measures (Moneyval ).
Accountants, who will complete their duties in December, are examining digital asset regulations, among other things. Much is at stake for Estonia as the Baltic nation may end up on a “grey list” alongside Malta, another small EU member state that has been trying to become a crypto-friendly destination.
The Estonian government is hardening its approach, despite policymakers in Brussels still thinking about the EU proposal for Markets in Crypto Assets (MiCA). In addition, European standards are expected to be less stringent than the new Estonian regulations. Capital requirements for crypto service providers, as proposed by the European Commission, range between €50,000 and €150,000.
Do you expect many crypto companies to leave Estonia after the country implements its stricter rules? Tell us in the comments below.
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