The Estonian government has approved legislation aimed at improving the regulation of its encryption industry, which is rapidly expanding due to favorable regulations and business environments. The new law that has not been passed will impose stricter requirements on service providers, while not preventing its customers from owning or exchanging cryptocurrency.
Tallinn authorities draft stricter rules for crypto service providers
The executive power of Estonia has prepared and approved draft legislation aimed at “more effectively regulating virtual asset service providers (VASP).” The Ministry of Finance explained on Sunday that the main goal is to reduce the risk of financial crimes through encrypted platforms registered and operated in the Baltic States.
The new regulation comes in the form of a draft revised law submitted to the Estonian Parliament, requiring VASP to identify customers in a way that links them to their transactions. After Estonia’s encryption-friendly regulations have attracted many license applicants, the regulations extend the ban on the opening of anonymous virtual accounts introduced in 2020.
The Ministry of Finance pointed out that the legislation will not affect individuals who own virtual currencies through private wallets not provided by VASP. It does not prohibit customers from holding and trading virtual assets, nor does it require them to share the private key of an encrypted wallet. At the same time, Estonian service providers will not be allowed to provide anonymous accounts or wallets.
The department emphasized that these measures are similar to the rules that apply to payments and bank transactions. These amendments translate the recommendations issued by the Anti-Money Laundering Financial Action Task Force (FATF) into Estonian law. These define some virtual asset services that are not defined in the current legislation of Estonia.
Estonia raises capital requirements for crypto licensees
An important aspect of the new regulations is to require companies to operate or establish contacts with Estonia to obtain licenses. The boom in apps is mainly due to the current rules that allow Estonian licensing companies to be resold to third parties. Facts have proved that the supervision of such entities is not feasible. The authorities pointed out that under the new regulations, the country’s financial intelligence agency (son) Will be able to reject such applications.
In addition, the regulator increased the equity requirement for VASP from 12,000 Euros to 125,000 Euros or 350,000 Euros, depending on the type of service. The Estonian government hopes that the threshold will reduce the number of dormant entities. The Ministry of Finance also stated that the average annual turnover of currently licensed VASPs is approximately 80 million euros.
Estonia announced in October that it was enacting new legislation, and Matis Mäeker, head of FIU at the time, disclose In an interview, only one in ten licensed crypto companies have a bank account in the country, adding that the regulator is considering revoking all previously issued licenses to restart authorization.By then, the agency has Revoke Approximately 2,000 licenses for virtual asset service providers, such as cryptocurrency exchanges and wallet operators.
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