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Estonia's Crypto Industry Plummets 80% After Controversial New Law

Estonia Tightens Regulations on Cryptocurrency Firms, Leading to Significant Decline in Industry Size

The national flag of Estonia (Heikki Siltala / Flikr)

Tue, 09 May 2023, 14:18 pm UTC

The number of registered cryptocurrency firms in Estonia has dropped by 80% after a controversial new crypto law came into force, according to data released by the country's money-laundering regulator on Monday.

The Financial Intelligence Unit (FIU), which is responsible for implementing the law, rejected around the same number of licenses as were withdrawn by the firms themselves. The law, which came into effect in 2022, requires companies to maintain substantial capital reserves and genuine links to Estonia.

Matis Mäeker, director of the FIU, said that in renewing authorizations, the unit had seen situations that would surprise every supervisor. He added that "suspicious circumstances" on applications suggested links to unlawful activities.

The FIU found that some applications showed individuals appointed to management boards without their knowledge or using falsified credentials. Documentation was often identical between different companies because many of them had used the same cluster of legal and professional service firms.

Mäeker said that the situation would soon return to normality in terms of supervision, moving from assessment on paper to daily on-site supervision. He added that the law requires "hippie-like" crypto projects to professionalize.

Estonia, home to digital unicorns like Wise, Bolt, and Skype, has sought to repair its reputation following a scandal involving the laundering of Russian funds through the Tallinn branch of Danske Bank. As a member of the European Union, the country must also implement the bloc's Markets in Crypto Assets regulation, which requires wallet providers and exchanges to gain a license.

Mäeker told a conference on March 29 that a recent evaluation of Estonia's anti-money laundering efforts by international standard-setters Moneyval "is tremendous work for the entire country as well as the FIU." He added, "Hopefully, it also closes the book on our banking sector and our banking sector scandals – I think it will, it did."

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