Estonia is preparing to implement a set of new anti-money laundering rules that will tighten requirements for crypto companies operating under Estonian licenses. The changes come amid fears that Russia could use crypto to evade Western sanctions and an ongoing audit of the Baltic nation’s AML policies.
Estonian Government Creates Tighter Regulatory Environment For Crypto Businesses
Estonia, whose banking sector has in the past been implicated in processing billions for suspicious Russian clients, is now taking steps to close loopholes that could allow Russia, its elites and allied Belarus to escape the sanctions imposed following the invasion of Ukraine.
Next Tuesday, the country’s amended law on the prevention of money laundering and the financing of terrorism will come into force, introducing strict standards. Crypto companies will bear the brunt of Estonia’s war on dirty money, Politico notes in a report.
The update will make the Estonian regulatory regime for platforms operating with digital assets even stricter than upcoming EU rules. The framework adopted in 2017 was considered too flexible because it allowed hundreds of companies, many of them based elsewhere, to obtain a license from Estonia.
Speaking to the publication, Finance Minister Keit Pentus-Rosimannus insisted that Estonia welcomed the innovation, but stressed that it would not tolerate financial crime and would maintain the prevention of money laundering. money as a priority. He further commented:
Supervision was simply not possible. But the risk was ours because they were operating with an Estonian license. This is something that has changed with the law.
Estonian authorities intend to make it harder for companies to join its crypto space. Entities offering digital wallet and online exchange services will need to meet a minimum capital requirement of €100,000 ($109,000) and those providing custody services will need to show at least €250,000.
The new legislation will also introduce higher registration fees, stricter due diligence obligations and tighter regulatory oversight. Additionally, crypto companies will be required to maintain a presence in the country, unlike before.
Tallinn is stepping up crypto oversight as part of an ongoing audit of the country’s safeguards against illicit financial flows conducted by the Council of Europe’s Committee of Experts on the Evaluation of Anti-Money Laundering Measures money and the financing of terrorism (Moneyval).
The auditors, who will complete their task in December, are examining, among other policies, the regulation of digital assets. The stakes are high for Estonia as the Baltic nation could find itself on a “gray listalongside Malta, another small EU member state that has attempted to become a crypto-friendly destination.
The Estonian government is toughening its approach despite policymakers in Brussels still eyeing European crypto asset markets (Mica) proposal. In addition, European standards should be less strict 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 businesses to leave Estonia after the country implements its stricter regulations? Tell us in the comments section below.
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