Upcoming AML Regulations in Estonia to Affect Cryptocurrency Industry

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Upcoming AML Regulations in Estonia to Affect Cryptocurrency Industry – Estonia is planning to implement a new set of anti-money laundering regulations that would impose stricter requirements on crypto firms operating under its license. Concerns that Russia may utilize crypto to avoid western sanctions have prompted the reforms, which coincide with an ongoing evaluation of the Baltic nation’s anti-money laundering policies.

Estonia is closing loopholes that could allow Russia, its elites, and allied Belarus to bypass sanctions imposed over the invasion of Ukraine. Estonia’s banking sector has previously been implicated in the processing of billions for suspicious Russian clients.

The country’s new Money Laundering and Terrorist Financing Prevention Act will take effect on Tuesday, establishing stricter regulations. According to a report by Politico, crypto businesses would bear the brunt of Estonia’s fight on dirty money.

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The modification will make Estonia’s regulatory environment for platforms that deal in digital assets even more stringent than the upcoming EU rules. The framework introduced in 2017 was deemed excessively loose because it permitted hundreds of firms, many of which were based outside of Estonia, to receive licenses from the country.

Minister of Finance Keit Pentus-Rosimannus told the publication that Estonia welcomes innovation but that it will not accept financial crime and as such money laundering prevention will be a top priority. He went on to say:

“It was simply impossible to supervise. However, because they operated under an Estonian license, the danger was ours. That was one of the changes made by the law.”

Estonian authorities want to make it more difficult for businesses to enter the country’s crypto space. Entities providing digital wallet and online exchange services must have a minimum capital requirement of €100,000 ($109,000), while those providing custodial services must have a minimum capital requirement of €250,000.

Higher registration fees, increased regulatory scrunity, and tighter due diligence procedures are all part of the new legislation. Furthermore, unlike previously, crypto firms would be forced to retain a presence in the country.

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Tallinn is increasing crypto supervision as the Council of Europe’s Committee of Experts on the Evaluation of Anti-Money Laundering Measures and the Financing of Terrorism conducts an ongoing examination of the country’s safeguards against illegal financial flows (Moneyval).

Auditors are looking into digital asset regulations, as well as other policies, as part of their assignment, which will be completed in December. The stakes are high for Estonia, which might be added to a “gray list” with Malta, another small European Union member that attempted to become a crypto-friendly destination.

Despite policymakers in Brussels still evaluating the EU’s Markets in Crypto Assets (MiCA) plan, the Estonian government is strengthening its stance. Furthermore, European regulations are projected to be less stricter than Estonia’s new regulations. The European Commission has recommended capital requirements for crypto service providers that range from €50,000 to €150,000.

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