On March 21, local media reported that the Estonian government had passed a bill imposing rigorous regulatory requirements on digital asset service providers. The law, enacted on March 20, is part of the country's attempts to regulate and strengthen the cryptocurrency business.
Estonia has been a prominent destination for crypto service providers, with estimations for 2021 indicating that roughly half of the world's crypto service businesses were registered there.
The Financial Intelligence Unit (Rahapesu Andmebüroo/RAB) has decreased the number of these firms to roughly 50 by 2024 as part of regulatory initiatives.
Matis Mäeker, the head of RAB, expounded on the anticipated changes, stating that the new rule will subject cryptocurrency service providers to financial supervision for the first time. He emphasized the need for these organizations to have safe systems in place to manage customer funds, drawing parallels to bank activities.
Beginning in 2026, crypto service providers will be subject to the supervision of Estonia's Financial Supervision Authority (FSA), also known as the Finantsinspektsioon.
The new legislation puts stronger operating and reporting requirements for cryptocurrency enterprises, with fines of up to €5 million, a major increase from the €40,000 cap under the old Anti-Money Laundering Act.
In addition, the new laws would require crypto service providers to get regulatory licenses, which the FSA will issue starting in 2025. Meanwhile, organizations with current FIU licenses must apply for new licenses by 2026.
The regulation comes in reaction to many high-profile episodes of cyber theft and business bankruptcies in Estonia's cryptocurrency sector, which resulted in large losses for investors. The government hopes that submitting enterprises to FSA monitoring, will reduce these risks and provide better protection to digital asset holders.
The new regulatory framework shows Estonia's continuous commitment to balancing financial innovation, market stability, and investor protection.
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