Once one of the world’s largest digital asset hubs, Estonia is getting tougher with virtual asset service providers (VASPs) and has driven out close to 400 firms over the past year.
Estonia’s anti-money laundering watchdog, the Financial Intelligence Unit (FIU), revealed this week that the number of licensed VASPs has dropped by nearly 80% since March last year.
On March 15, 2022, the amended Money Laundering and Terrorist Financing Prevention Act took effect. The law required Estonian VASPs to adhere to more stringent requirements, including tripling the fee for a VASP license to €10,000 ($10,973). It also required them to provide detailed information on their technology systems and board members. More significantly, a VASP could be denied a license if “it doesn’t intend to operate in Estonia or has no significant connections with Estonia.”
Since the law took effect, the FIU said 200 firms had abandoned their permits. The regulator has revoked licenses for a similar number of firms. As of May 1, only 100 digital asset firms were licensed in Estonia, an 80% drop from a year ago.
FIU Director Matis Mäeker says that VASPs that lost their licenses had it coming. “In renewing authorisations, we saw situations that would surprise every supervisor,” he stated.
Some VASPs listed directors and contact persons who were not aware of the companies, while others copy-pasted business plans, with most lacking any relevance to Estonia (a requirement for a license). The FIU director says this points to an intention to use the Northern European country for illegal activities. Estonia is no stranger to money laundering and was at the center of the €200 billion ($219.5 billion) Danske Bank laundering scandal, Europe’s largest.
“This calls into question the credibility of the companies that wanted to do business here – their actual desire to provide services in Estonia or, vice versa, shows the desire of certain persons to use the Estonian economic and financial system for illegal activities,” Mäeker stated.
Estonia’s tough approach divides opinion
Estonia’s new stringent approach has received praise from some who believe this will drive out the scammers and promote trust in the industry. Others have criticized the approach, saying it’s a thinly-veiled move to drive digital assets out of the Baltic country.
Olga Rogerson, the Chief Operating Officer at The People’s SCE, is among those in support of the new measures. Speaking to CoinGeek, Rogerson, who is based in Estonia’s capital Tallinn, says that obtaining a VASP license has been way too easy for too many years. Some of the recipients became dormant as they had no viable product, while others obtained a permit and served clients from other countries.
“This act might be looked at as less favorable towards the crypto industry, or one can look at it from a perspective that legitimate businesses will remain – the ones that hold the interests of their clients dearly. And people investing in these projects can be more certain that Estonian VASP license has a good value and protects their interests,” says Rogerson, whose company purports to be the first decentralized cooperative.
Not everyone agrees. Some, like OSOM Finance’s Jerome Dickinson, believe the new laws are a targeted attack on digital currencies.
“Regulators are often finding ways to delay or prolong licensing processes, or worse, threaten to declare their managers or shareholders unfit and improper – not on the merits but simply because they are involved with crypto,” he told one outlet.
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