Estonia, as one of the EU member states, has a reputation as an advanced digital country with a high level of economic freedom. Cryptocurrency in Estonia is allowed by the government, has a legal framework. The country is recognized as a leader in the regulation of cryptocurrencies. The legislation in relation to the crypto business is not prohibitive, but strict. This approach, in my opinion, not only helps to attract foreign currency to the country, but also encourages the development of the white side of business.
Regulatory framework
The regulation of cryptocurrency in Estonia is defined by the law “On Combating Money Laundering and Financing of Terrorism”, which was approved in November 2017. It defines the procedure for obtaining licenses for enterprises that distribute services of the cryptocurrency business and other virtual transactions. And the introduction of the EU Anti-Money Laundering Directive into national legislation has created a legal framework for cryptocurrency activities.
I am aware of the following regulatory authorities:
- financial inspection gives instructions to cryptocurrency companies on the implementation of transaction control methods, customer recognition techniques;
- Anti-money Laundering Bureau issues licenses to those organizations that can legally provide services for the storage, transfer, and sale of virtual securities.
And although cryptocurrency transactions are not legally prohibited, the state closely monitors those who purchase or sell funds. If the crypto amount per month exceeds 15 thousand euros (individuals) or 25 thousand (legal entities), the competent authorities may require documents on the origin of the capital. There are no criminal or administrative penalties for possession or trading transactions in the State.
Updated requirements for the storage, exchange, and development of crypto projects for those who have received licenses began to take effect in the spring of 2020. Those who continued to work on the previously open ones were given to put their affairs in order until the summer. 1,000 companies were barred from continuing operations in December. More than 400 organizations have retained their licenses. The Estonian Ministry of Finance proposed a draft law with new rules for crowdfunding organizations and cryptocurrency companies in January 2021. The Department of Financial Supervision will control the crypto industry, if the law is adopted.
Advantages of strict Estonian laws
According to the forecasts of representatives of the cryptocurrency market, large countries will continue to regulate this sector in 2021, there may be easing, tightening in the legislative framework. What are the changes in the law? In many countries, the cryptocurrency is still in the so-called gray zone, there is no clear regulation, therefore, any startups, organizations that deal with it are at risk. In other words, anyone who works with this currency can be suspected of money laundering. From my point of view, Estonia, by tightening the licensing requirements, has provided this business with market privileges:
- By equating crypto projects with traditional financial organizations with new requirements, the state provides guarantees and security to users and partners of crypto companies from arbitrariness. Any company, if its activities are controlled, can be called to account.
- Crypto business services are open to individuals and organizations at the level of services provided by legal financial institutions.
- Licensing, first of all, emphasizes that the cryptocurrency business is the same sector of the country’s economy as any other. This gives companies a chance to officially provide cryptocurrency services, without the risk of being outside the legal field.
- Transactions with cryptocurrency, ICO projects are not taxed.
Summing up, we can say that Estonia solves two problems at once with one legislative project. Firstly, it eliminates the possibility of money laundering, and secondly, it creates a new legal sector of the economy.