Estonia's crypto honeymoon at an end as stricter regulations loom

Estonia’s finance ministry is reportedly looking to enact stricter crypto licensing regulations. This comes after the authorities revoked the licenses of about two-thirds of the cryptocurrency businesses operating in the country back in 2020.

According to ERR News, the Estonian Ministry of Finance issued draft legislation back in January to tighten the noose on the country’s crypto industry. As part of the proposed rule changes, the Finantsinspektsioon — Estonia’s Financial Supervisory Authority — will oversee the regulation of cryptocurrency businesses instead of the Financial Intelligence Unit.

This change will bring crypto oversight under the purview of financial regulators as against the current paradigm where the FIU, which is part of the police department handles the monitoring of cryptocurrency businesses.

Crypto firms interested in operating in Estonia will have to pay a licensing fee to the Finantsinspektsioon. The current 381 license holders will also have to reapply for an operating permit from the Financial Supervisory Authority.

According to Erki Peegel, a spokesperson for the finance ministry, the government’s aim is not anti-crypto in nature. However, authorities expect that only 50 to 100 crypto firms that already hold licenses are in a position to comply with the proposed regulatory rule changes.

The proposed rule changes are also coming amid efforts by the government to combat money laundering activities. Back in June 2020, a $220 billion money laundering scandal erupted involving Danske Bank. Also, in 2020, reports emerged that crypto scammers had overrun the country’s e-residency program.

However, Estonia’s recent political upheaval with the resignation of Prime Minister Jüri Ratas amid a corruption scandal has put the passage of the proposed legislation on hold. Indeed, today was the deadline for parliament to deliberate on the issue.