Estonia’s New Laws Squeeze Out Hundreds of Crypto Firms
Dishonest executives and ridiculous business plans were some of the issues that Estonia’s money laundering regulator found within local crypto organizations.
Revised Illicit Financing Laws Prompt Exodus of Crypto Firms
Following the recent implementation of the Terrorist Financing Prevention and Anti-Money Laundering laws (AML)in Estonia, nearly 400 virtual asset service providers (VASPs) have willingly shut down or had permits canceled.
The revised regulations improved VASPs’ defined scope by requiring organizations to have valid connections to Estonia and information reporting and capital requirements. Besides, it added licensing costs and introduced the Financial Action Task Force Travel Rule.
Voluntary Shutdown and Revoked Licenses Dominate Estonia Crypto Space
On May 8, the Estonian Financial Intelligence Unit (FIU) released a statement showing that modifications to the AML regulations on March 15 have resulted in the voluntary shutdown of nearly 200 domestic crypto providers. Failure to comply with the requirements has also led to the revocation of another 189 providers.
According to Matis Maeker, FIU’s director, the supervision tasks before and following the amendments have been appropriate. This is based on the documents provided by providers whose authorizations have been lost and their operational strategies and risks involved.
Further, he claimed that they witnessed cases that shocked all supervisors during the renewal of authorizations. FIU also claims that the major clear-out resulted in only 100 registered crypto organizations nationwide by May 1.
Crypto Firms Found to Furnish Deceptive Company Data
The investigative unit revealed several general issues that compelled it to shut down the organizations, especially those concerning deceptive company data. For instance, it established that some organizations had registered company contacts and board personnel without knowing the persons themselves.
Additionally, other organizations had several persons in the books who had provided false information regarding their professional backgrounds. FIU also established that several organizations had duplicated business plans from each other and needed a link to the country.
Estonia Strive to Cut the Conduit of Billion-Dollar Illicit Capital
In the recent past, Estonia has made significant efforts to enact robust Anti-Money Laundering laws. A major reason behind this initiative is that in 2018, it was discovered that illicit capital worth nearly 235 billion dollars had been wired illegally via the nation’s Denmark megabank Danske Bank branch.
Another factor that has had an effect is the current Russia-Ukraine war. In this case, Estonia strives to have robust AML laws to restrict revenues supporting Russia’s war machine. In turn, this will safeguard the global financial systems.
The enhancement of the AML laws is also linked to the nation’s membership in the European Union (EU). Hence, implementing the forthcoming Markets in Crypto-Assets (MiCA) laws in early 2025 will be critical. Under MiCA, all crypto organizations must conform to strict Anti-Money Laundering laws and terrorism deterrence requirements.
