Estonia, a country well-known for its digital unicorns like Wise, Bolt, and Skype, has seen a significant reduction in the number of registered crypto firms due to a controversial law implemented in 2022. The law requires companies to hold substantial capital reserves and maintain genuine connections to Estonia. According to data from the nation’s money-laundering regulator, this has led to a drop of approximately 80% in registered firms.
This law has seen mixed reactions among crypto enthusiasts. On the one hand, some see it as a necessary move to ensure the security and transparency of the market. Around 200 licenses have been withdrawn by the companies themselves, and nearly the same number were rejected by the country’s Financial Intelligence Unit (FIU). Matis Mäeker, director of the FIU, said in a statement that they encountered situations that would surprise every supervisor. The applications revealed instances of individuals appointed to management boards without their knowledge, or using falsified credentials.
While these findings support the argument for tighter regulations, others remain skeptical of the new law’s impact on innovation and growth in the industry. Crypto enthusiasts have long valued the decentralized nature of the market, which has led to the rapid rise of new projects and companies. The regulation imposed by this law may hinder the development of new businesses, forcing existing ones to maintain the status quo.
Nevertheless, Mäeker seems optimistic about the future, stating that normalcy in terms of supervision will soon return and the focus will shift from assessing on-paper applications to daily on-site supervision. This law requires what Mäeker referred to as “hippie-like” crypto projects to professionalize, potentially strengthening the industry as a whole.
Estonia’s actions may be part of a larger trend towards greater regulation in the world of cryptocurrencies. As a European Union member, Estonia will soon need to implement the bloc’s Markets in Crypto Assets regulation, which requires wallet providers and exchanges to obtain a license.
With a recent evaluation by international standard-setter Moneyval on Estonia’s anti-money laundering efforts, the country seems eager to put its past, marked by scandals involving the laundering of Russian funds through Danske Bank’s Tallinn branch, behind it. Mäeker stated at a conference on March 29 that this evaluation is “tremendous work for the entire country and the FIU,” expressing hope that it would close the book on their banking sector scandals.
In conclusion, the controversial crypto law in Estonia has led to a significant decrease in the number of registered firms, with both supporters and skeptics voicing their opinions on the matter. As the country moves forward with increased regulation and greater scrutiny, the balance between security, transparency, and fostering innovation within the industry will remain an ongoing challenge to navigate.