A new set of anti-money laundering rules are to be enforced in Estonia, which are expected to toughen the rules and requirements applicable to crypto companies that have a license to operate in the country. These changes come at a time when there are worries that Russia could make use of cryptocurrency in order to evade the sanctions that have been imposed by western countries because of its invasion of Ukraine. Moreover, the existing AML policies of the Baltic nation are also undergoing an audit. In the past, the banking sector of Estonia has been implicated processing transactions worth billions for suspicious Russian clients.
Therefore, the country has decided to address the loopholes that could potentially be used by Russia, or its ally Belarus, in evading the sanctions that have been imposed against it. The Money Laundering and Terrorist Financing Prevention Act of the country has been amended and it will be put into effect next Tuesday, which is expected to introduce stringent standards. According to reports, it seems that crypto companies will have to bear the brunt of the country’s war against money laundering and dirty money. Currently, the European Union is working on developing its own rules for crypto companies and other platforms in the digital assets industry.
However, it is expected that the update to be made to Estonian rules would be even tougher for companies operating under the Estonian regulatory regime. The existing framework had been adopted in 2017 and it was considered a loose one because it permitted hundreds of businesses to get licensing from Estonia, including those that are also based elsewhere. KeitPentus-Rosimannus, the Minister of Finance, said that innovation was welcome in Estonia, but added that they would not be tolerant of financial crime and it was their priority to ensure there was no money laundering.
He further stated that it was not possible to supervise, but since they are operating with an Estonian license, it makes it the country’s risk. But, he said that this law can help change this. The Estonian authorities are planning to make it harder for companies to become part of its crypto industry. Entities that are offering online exchange and digital wallet services would have to have a minimum capital of about €100,000 ($109,000) and a minimum capital of €250,000 would be needed for those that offer custodial services. Under the new law, there will be heavier regulatory scrutiny, tougher obligations for due diligence and registration fees will also go up.
In addition, as opposed to before, now crypto companies will have to maintain their presence in Estonia as well. The country’s safeguards are being audited due to illicit financial flows due to which crypto oversight has been tightened in Tallinn. The task will be concluded by the auditors in December and digital asset regulations are just one of the many policies that are being regulated. The matter is a serious one for Estonia because there is a possibility that it could be put on the ‘gray list’, just like Malta, which had also tried to be crypto-friendly.