The Estonian government has given its approval to a bill that will regulate cryptocurrency service providers, a significant development in the country’s cryptocurrency landscape. This decision is a crucial step towards ensuring comprehensive oversight of the rapidly growing crypto sector in Estonia. However, the bill’s journey to becoming law will depend on a successful vote in parliament.
Under the proposed legislation, cryptocurrency service providers will be supervised by the Financial Supervision Authority (FSA). This move aims to strengthen regulatory oversight and increase accountability within the industry. Currently, these providers operate under the supervision of the Financial Intelligence Unit (FIU) and must comply with Anti-Money Laundering (AML) regulations.
If the bill is approved by parliament and becomes law, the FSA will start issuing licenses to cryptocurrency service providers from 2025 onwards. Existing license holders from the FIU will have a transition period and will be required to apply for FSA licensing by the end of that year. Estonian Finance Minister Mart Võrklaev has expressed confidence in the licensing process, emphasizing that reputable service providers will be able to obtain the necessary licenses from the Financial Supervisory Authority.
One notable aspect of the proposed legislation is the introduction of significantly higher fines for AML violations. While the current national law allows fines of up to 40,000 euros ($43,450), the new bill could see penalties rise as high as 5 million euros ($5.2 million). This substantial increase demonstrates Estonia’s commitment to fighting financial crimes and ensuring strict compliance with cryptocurrency regulations.
The bill aims to align Estonia with the European Union’s Markets in Crypto-Assets (MiCA) regulations, which seek to harmonize regulatory frameworks across member states. Additionally, the proposed legislation will modify the securities prospectus requirement, showcasing Estonia’s proactive approach to regulatory evolution in line with broader European directives.
Estonia has been positioning itself as a crypto-friendly jurisdiction since 2017 when it enacted legislation to facilitate the establishment and operation of cryptocurrency companies, as well as streamline registration processes through e-residency. However, the country implemented stricter regulations in 2020 following a corruption scandal unrelated to crypto, signaling a shift towards a more cautious regulatory approach.
As Estonia moves towards implementing comprehensive regulation for cryptocurrency service providers, industry stakeholders eagerly await the outcome of the upcoming parliamentary vote. With the potential for higher penalties and closer supervision by the Financial Supervision Authority, the proposed legislation highlights Estonia’s commitment to fostering a strong and compliant cryptocurrency ecosystem while aligning with evolving European regulatory standards.
