Estonia’s administration finally shuts down rumors on imposing a blanket ban on crypto-assets. The finance ministry released a rebuttal clarifying that the draft law which is currently awaiting parliamentary readings, is aimed at regulating virtual asset service providers [VASPs] and does not include measures to ban users from owning and trading crypto-assets nor require customers to reveal their private keys to wallets. In accordance with the draft legislation, VASPs that facilitate transactions of digital assets are required to follow the KYC norms similar to bank transfers like identifying their customers.
“The new regulation also states that only companies who operate in Estonia or are connected to it can apply for a license to operate as a VASP. Under new rules, the Financial Intelligence Unit can decline a license where the entity does not have any business operations in Estonia nor has any apparent connection to it.”
Further, one of the important amendments that would affect smaller VASPs is capital requirements, which as per the draft will be raised to a minimum of 125 000 or 350 000 euros of share capital from the current floor of 12 000 euros. This measure will further ‘reduce the risk of registering or keeping dormant VASPs for resale’. Famed Estonian entrepreneur while sharing his views on the draft feels that it might stifle the growth of early startups.
Estonia’s crypto scene so far
Beginning in February 2021, Estonia announced several changes to its definition of Virtual Asset Service Providers, or VASPs, to incorporate other cryptocurrency-related services such as ICO, dAPPs — a move that was feared to impact Bitcoin [BTC] ownership in the country — according to European compliance solution Sumsub. Again on September 21, its Finance Ministry published a draft bill to update the Money Laundering and Terrorist Financing Prevention Act [the AML Act] to prevent money laundering and terrorist financing.
Estonia was among the first nation in the European Union to issue licenses to firms dealing with cryptocurrency, but had to issue whip after $235 billion illicit funds was found in Danske Bank’s Estonian branch, in 2018 with EU Justice Commissioner calling it as Europe’s biggest money-laundering scandal.