The Estonian Ministry of Finance has announced the implementation of a new law on cryptocurrency service providers. The official statement said that trading in digital assets will continue to be legal, while the new regulations will only cover providers of wallets to store cryptocurrencies.
The Estonian Ministry of Finance does not intend to introduce any bans that would harm the interests of cryptocurrency market participants. The new law is only intended to regulate the provision of cryptocurrency storage tools to customers.
New regulations are a cause for concern
The Estonian Finance Ministry’s statement was made in response to rumours that the new law would threaten decentralised finance. How?
By withdrawing Wallets that are not duly protected from the market. That is, de facto, all typical cryptocurrency wallets that can only be accessed by their users.
It was feared that the new regulations would only allow the use of wallets transparent to government institutions, which would blatantly violate the idea of decentralised payment systems. The situation would be complicated by the fact that a significant number of companies operating in the cryptocurrency market are registered in Estonia.
According to the declarations of the Estonian Ministry of Finance, there is no reason for such concerns. To dispel any doubts, the institution has set up a special website with answers to the most frequently asked questions in connection with the New draft law.
What does the bill contain?
If the ministry’s declarations are to be believed, the new bill was drafted under pressure from the need to implement the guidelines of the Financial Action Task Force (FATF). Therefore, a ban on the free trading of cryptocurrencies should not be expected. Customers will also not have to share their private keys, with which the wallets are secured, with anyone.
On the aforementioned website, one can read that the Estonian Financial Intelligence Unit (FIU), responsible, among other things, for licensing VASPs since 2017, places too few requirements on licensed cryptocurrency service providers. In 2020. FIU revoked the licenses of hundreds of companies, justifying this decision by the lack of common interests with Estonia. The new legislation will require VASP entities to operate within the country or have a “visible connection” to its interests.
In addition, the law will tighten capital requirements for VASPs. Depending on the nature of the services provided, such companies will have to have a minimum share capital of €125,000 or €350,000. Currently, the minimum required share capital is only €12,000.