A bill to regulate cryptocurrency service providers has been approved by the Estonian government, according to state-run media reports. It still has to pass a parliamentary vote.

Under the legislation, the providers would be subject to the supervision of the Financial Supervision Authority (FSA). Currently, cryptocurrency service providers are registered by the Financial Intelligence Unit (FIU) and are required to conform to Anti-Money Laundering (AML) rules. The FSA would begin issuing licenses in 2025, and holders of FIU licenses would have to apply for FSA licensing before the end of that year. Estonian Finance Minister Mart Võrklaev said:

“I believe that anyone who takes this seriously and wishes to provide a service will also be able to obtain a new license from the Financial Supervisory Authority."

Under national law, fines for AML violations top out at 40,000 euros ($43,450). Under the new law, fines of up to 5 million euros ($5.2 million) will be possible.

Võrklaev announced that he had sent the bill, which has not been translated into English, to the government last week. The bill has to be approved by the government before it goes before the Riigikogu, the unicameral Estonian parliament, for a vote.

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The bill would bring Estonia into conformity with the European Union’s Markets in Crypto-Assets (MiCA) regulations. It would also change the securities prospectus requirement. While previously, companies wishing to raise capital in the form of shares or bonds worth more than 5 million euros had to prepare a detailed prospectus — a slow and expensive undertaking — now the threshold would be raised to 8 million euros ($86.9 million).

Estonia positioned itself as crypto-friendly in 2017, when it passed legislation with advantageous laws for crypto firms and easy registration, including e-residency. It cracked down on crypto firms in 2020 after a large-scale corruption scandal unrelated to crypto broke out in the country.

In 2020, Estonia revoked 500 FIU-issued crypto company licenses for failing to launch in the country within six months of registration. After months of police scrutiny, the number of crypto firms licensed in Estonia fell from 1,234 at the end of 2019 to 353 in September 2020.

In October 2021, the FIU considered revoking all crypto company licenses and relicensing the businesses. It imposed stricter AML requirements at the end of 2021. After that law was amended in 2023, almost 400 virtual asset providers were either shut down or closed voluntarily.

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