Following the Danske Bank money-laundering scandal, Estonian fiscal authorities & legislators are now tightening the country’s AML laws & regulations. As a result, an upwards of 400 cryptocurrency companies were stripped of their licenses in the recent months. Given the latest developments, entrepreneurs contemplating starting a cryptocurrency business in the Republic of Estonia should pay special attention to the country’s new regulatory policies.
What Does it Mean?
Estonia is credited with being one of the first EU countries to have taken an open approach to cryptocurrencies. That has resulted in an upwards of 1300 organizations obtaining a cryptocurrency license in the Republic of Estonia over the past three years.
Currently, the major concern Estonian lawmakers have is that registered cryptocurrency exchanges in Estonia may use their platforms for fraudulent activities. To prevent that from happening, the country’s financial regulators have put in place far stricter rules which make the licensing of cryptocurrency companies in Estonia a lot more difficult.
In particular, the Estonian government has increased the cost of the license, extended the length of issuance & tightened verification procedures.
From now on, registering a cryptocurrency exchange in Estonia requires opening an Estonian branch of a foreign company. According to the FIU (an independent subdivision of Estonia's Police & Border Guard Agency), licenses of certain cryptocurrency companies may be revoked because they’re owned & run by individuals residing outside Estonia.
Estonia: Regulation of Cryptocurrencies
According to Estonian legislation, cryptoassets aren’t considered legal tender; however, they’re deemed to have “digital value” & may be used as payment instruments. Virtual currencies are also defined as virtual assets & exempt from VAT.
Three years ago, the Republic of Estonia enacted AML & CFT regulations according to which cryptocurrency exchanges registered in the country are required to apply for the following licenses:
- maintenance of virtual currencies;
- maintenance of crypto-wallets.
The recent revocation of licenses should, therefore, be perceived as an action aimed at ensuring compliance with the said AML/CFT regulations.
Regulation of cryptocurrencies in the Republic of Estonia is currently modelled on UK legislation. Just like in Estonia, cryptocurrencies in Great Britain aren’t considered legal tender; however, exchanges dealing with cryptoassets are deemed legitimate if they comply with registration-related requirements.
Looking to start a cryptocurrency business in Estonia? Need more information on cryptocurrency licensing in Estonia? Why not reach out to IQ Decision UK? Just sign up for an individual consultation on cryptocurrency regulation in the EU and UK & our legal experts will be happy to advise you on any legal issues you’re facing.