About 400 virtual asset service providers have either lost their licences or voluntarily shut down in Estonia after the government enhanced TFP and AML laws with stricter rules for the crypto industry players
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According to a statement from the Estonian Financial Intelligence Unit (FIU), almost 200 domestic crypto service providers voluntarily shut down since the amendment to the national AML and FTP laws was introduced on March 15, 2022.
Almost the same number of virtual asset providers (189) were forcibly shut down by the regulators. The thorough inspection revealed that those firms didn’t comply with the enhanced requirements. Namely, FIU found out that many companies provided misleading corporate information, false information about the board members, identical business plans copied from each other, etc.
Many companies were also discovered to be lacking “any logic or connection with Estonia,” while legitimate links to the country of registration were among the most significant regulation updates.
As for other amendments, virtual asset service providers (VASPs) in Estonia also have to comply with capital and information reporting requirements, as well as the Financial Action Task Force (FATF) Travel Rule. In addition, VASPs became subject to increased licensing fees.
As of 1 May 2023, there remained 100 active virtual asset service providers, including crypto exchanges and wallets, crypto transfer providers, and virtual currency issuers authorized in Estonia.
FIU will continue reviewing the authorisations for some time. However, the organization soon aims to return from assessment on paper to regular daily on-site supervision.
Enhanced AML rules in Estonia were partly a preparation for the upcoming EU MiCA regime and transfer of crypto funds regulations, while also being a result of the country’s lengthy battle with illicit funds once laundered through major financial institutions like the Estonian branch of Denmark Danske Bank.
Besides, the ongoing war between Russia and Ukraine incentivized Estonia to reinforce its AML regulation in order to “cut off revenues supporting Russia’s war machine and protect international financial systems.”
