The Estonian government has reportedly given its approval to a bill aimed at regulating cryptocurrency service providers, as per state-run media reports. However, the bill still needs to pass a parliamentary vote to become law.
Under the proposed legislation, cryptocurrency service providers would be placed under the supervision of the Financial Supervision Authority (FSA). Currently, these providers are registered with the Financial Intelligence Unit (FIU) and are required to comply with Anti-Money Laundering (AML) rules. If the bill becomes law, the FSA will begin issuing licenses to cryptocurrency service providers in 2025, and those already holding FIU licenses will need to apply for FSA licensing by the end of that year. Estonian Finance Minister Mart Võrklaev stated that under the current national law, fines for AML violations are capped at €40,000 ($43,450). However, if the new legislation is passed, fines of up to €5 million ($5.2 million) could be imposed.
Võrklaev revealed that he submitted the bill to the government last week, although it has not yet been translated into English. Once approved by the government, the bill will be presented to the unicameral Estonian parliament, known as the Riigikogu, for a vote.
The proposed bill aims to align Estonia with the European Union’s Markets in Crypto-Assets (MiCA) regulations and also introduces changes to the securities prospectus requirement. Previously, companies seeking to raise capital through shares or bonds worth over €5 million had to prepare a detailed prospectus, which was a time-consuming and costly process. Under the new legislation, this threshold would be raised to €8 million ($86.9 million).
In 2017, Estonia positioned itself as a crypto-friendly country by enacting legislation that offered favorable conditions for crypto firms and simplified registration, including e-residency. However, in 2020, the country cracked down on crypto firms following a major corruption scandal unrelated to the crypto industry.
In that same year, Estonia revoked 500 crypto company licenses issued by the FIU because these companies failed to commence operations in the country within six months of registration. As a result of increased police scrutiny, the number of licensed crypto firms in Estonia decreased from 1,234 at the end of 2019 to 353 by September 2020.
By October 2021, the FIU considered revoking all crypto company licenses and reissuing them. Stricter AML requirements were introduced at the end of 2021. Following the amendment of this law in 2023, nearly 400 virtual asset providers either ceased operations or voluntarily closed down.
Overall, Estonia has made significant efforts to position itself as a blockchain-friendly nation, with digital natives leading the way in creating a blueprint for the country’s blockchain ecosystem.