To continue our sequence of articles about “how not to lose the cryptocurrency license in Estonia” Nikolay has prepared a closing article about the general shift in Estonia in terms of cryptocurrency regulation. You can read about the first, second and third recommendations here on our blog.
The fourth article is related to the attitude of public authorities which is existing in Estonia when it comes to cryptocurrency business.
Closing article: Estonian standpoint on cryptocurrency business
From my point of view, Estonia did everything correctly. They transposed the 5th AML Directive where cryptocurrency service providers are required to be registered. Estonia implemented such a registration, which got the name “Estonian crypto licenses” in the crypto world.
After some marketing events e.g. Estcoin, E-residency, etc, such licenses became popular and due to its simplicity to receive it, businesses all over the world came to Estonia.
The problem, I can admit, is that Estonia offers a lot of services online to business, from registering a company to applying for licenses. This created an easy way for businesses all over the world to get licensed in Estonia. It was possible to open a company and receive the licenses without even coming to Estonia. No physical presence of the company and directors was required at that time. In addition due to a lot of applications, the supervisory authority was struggling to do a proper check on the company’s understanding of AML compliance.
The situation is different now, when we have a stricter regulation for cryptocurrency businesses that entered into force in March 2020. I believe a stricter law is not the death of the crypto industry in Estonia, but rather a good trigger to bring quality on the market over the quantity.
One needs to have a physical presence in Estonia, there are stricter AML requirements and more time to process the application, etc. Certainly, it will impact the number of people who want to open a crypto exchange in Estonia.
In addition, I do not think the Estonian government is against the cryptocurrency business. Estonia was one of the first countries that regulated this industry and there are no reasons why the situation should be different. The Financial Intelligence Unit, the one that supervises the crypto business, is expected to be separated from Estonian Police and will have independent status with additional resources for its activity. Therefore, the supervision of cryptocurrency from the very beginning will become stricter to prevent the crypto sector from any illegal activities.
The main aim of a new law and AML practice is to strengthen the whole financial sector from having any vulnerabilities for money laundering. The concern in Estonia now is to build a system where cryptocurrency companies can be properly supervised by the authorities. This also includes revoking licenses from those who are not able to comply with the law.