A new bill establishing legal requirements for cryptocurrency service providers in a bid to regulate the market and increase reliability has been approved by the government. From 2026, companies will come under the supervision of the Financial Supervision Authority (Finantsinspektsioon).
As early as 2021, it is estimated that nearly half of the world’s crypto service providers, approximately several thousand companies, were registered in Estonia, Thursday’s “Aktuaalne kaamera” said.
The Financial Intelligence Unit (Rahapesu Andmebüroo/ RAB) has managed to reduce their number to around 50.
But it has taken until now to introduce targetted regulation.
“What will change is that they will now come under real financial supervision. They used to only deal with anti-money laundering requirements and that’s part of the whole problem. They take in client assets – in the simplest sense they are like banks taking in people’s deposits and doing something with that money. They have to hold that money, they have to then have systems in place so that as long as the person wants to get that money back, they have something to give back,” explained Matis Mäeker, head of RAB.
In addition to financial crimes, crypto business bankruptcies or cyber thefts have occurred in Estonia where people have lost their property.
This can be stopped by bringing companies under the FSA’s supervision, Mäeker said.
The law will toughen up operational and reporting requirements. Fines of up to €5 million could be imposed. Under the Anti-Money Laundering Act, fines were capped at €40,000.
Minister of Finance Mart Võrklaev (Reform) said: “In 2025, licenses will be issued by the Financial Supervisory Authority and those who currently hold licenses from the Financial Intelligence Unit will have to obtain additional or new licenses from the Financial Supervisory Authority by 2026. /…/If these firms wish to continue to operate, they will comply with the necessary requirements and I believe that anyone who takes this seriously and wishes to provide a service will also be able to obtain a new license from the Financial Supervisory Authority.”
Economic Analyst Peeter Koppel said the legalization of the crypto market will not increase the credibility of cryptocurrency, because the main beneficiaries of crypto are speculators.
“It is simply a step towards cleaning up the environment. It does not change the substance of anything, at least for me and I think for the average speculator, for the non-investor, because you cannot invest in crypto. It is only speculation. It only makes the environment a little bit better, a little bit more reliable. As has been mentioned, it reduces that “slightly bad smell”. It in no way validates crypto as a concept,” said Koppel, who is financial advisory firm Redgate Wealth’s chief investment officer.
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