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Upcoming AML Regulations in Estonia to Affect Cryptocurrency Industry

Estonia’s banking sector was implicated in processing billions of dollars for Russian clients in the past. Now, Estonia is working to close those loopholes which could allow Russia, its elites and allied Belarus to avoid the sanctions imposed after the invasion of Ukraine.

The country’s Money Laundering and Terrorist Financing Prevention Act, which has stricter standards, will be in force next Tuesday. According to Politico, crypto companies will bear the brunt in Estonia’s fight against dirty money.

This update will make Estonia’s regulatory regime for platforms that use digital assets more stringent than the EU rules. It was deemed too loose because it allowed hundreds of businesses to apply for licensing from Estonia in 2017, despite being based elsewhere.

The Minister of Finance Keit Pennus-Rosimannus spoke out in support of the publication and stressed that Estonia is open to innovation, but that it will not tolerate financial crimes. He also stated that the priority will be given to money laundering prevention. He added:

Supervision was impossible. They operated under an Estonian license, but that was not a problem. This was the only thing that was changed by the law.

Estonian authorities are making it more difficult for companies to join the crypto space. Companies offering online exchange and digital wallet services will have to raise at least EUR100,000. Custodial service providers will need to raise at least EUR250,000.

New legislation will also increase registration fees and require stricter due diligence. It will also be subject to more regulatory scrutiny. In addition, crypto companies will have to be present in the country. This is a change from before.

Tallinn has tightened crypto oversight in the context of an ongoing audit of the country’s safeguards from illicit financial flows by the Council of Europe’s Committee of Experts on the Evaluation of Anti-Money Laundering Measures ( Moneyval).

The task of the auditors, which will be completed in December, is to examine digital asset regulations and other policies. Estonia is in a high-stakes situation as the Baltic country could end up on a grey list alongside Malta, another EU member that attempted to be a crypto-friendly destination.

The Estonian government is adjusting its approach, despite Brussels policy makers still considering EU’s Markets In Crypto Assets ( MICA) proposal. The European standards will be more stringent than the Estonian ones. The European Commission proposes capital requirements for crypto service providers. They range from EUR50,000 to EUR150,000.