Estonia introduces legislation to regulate cryptocurrency providers (2024)
A new bill establishing legal requirements for cryptocurrency service providers in a bid to regulate the market and increase reliability has been approved by the government. From 2026, companies will come under the supervision of the Financial Supervision Authority (Finantsinspektsioon).
As early as 2021, it is estimated that nearly half of the world's crypto service providers, approximately several thousand companies, were registered in Estonia, Thursday's "Aktuaalne kaamera" said.
The Financial Intelligence Unit (Rahapesu Andmebüroo/ RAB) has managed to reduce their number to around 50.
But it has taken until now to introduce targetted regulation.
"What will change is that they will now come under real financial supervision. They used to only deal with anti-money laundering requirements and that's part of the whole problem. They take in client assets – in the simplest sense they are like banks taking in people's deposits and doing something with that money. They have to hold that money, they have to then have systems in place so that as long as the person wants to get that money back, they have something to give back," explained Matis Mäeker, head of RAB.
In addition to financial crimes, crypto business bankruptcies or cyber thefts have occurred in Estonia where people have lost their property.
This can be stopped by bringing companies under the FSA's supervision, Mäeker said.
The law will toughen up operational and reportingrequirements. Fines of up to €5 million could be imposed. Under the Anti-Money Laundering Act, fines were capped at €40,000.
Minister of Finance Mart Võrklaev (Reform) said: "In 2025, licenses will be issued by the Financial Supervisory Authority and those who currently hold licenses from the Financial Intelligence Unit will have to obtain additional or new licenses from the Financial Supervisory Authority by 2026. /.../If these firms wish to continue to operate, they will comply with the necessary requirements and 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."
Economic Analyst Peeter Koppel said the legalization of the crypto market will not increase the credibility of cryptocurrency, because the main beneficiaries of crypto are speculators.
"It is simply a step towards cleaning up the environment. It does not change the substance of anything, at least for me and I think for the average speculator, for the non-investor, because you cannot invest in crypto.It is only speculation. It only makes the environment a little bit better, a little bit more reliable. As has been mentioned, it reduces that "slightly bad smell". It in no way validates crypto as a concept," said Koppel, who is financial advisory firm Redgate Wealth's chief investment officer.
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A new bill establishing legal requirements for cryptocurrency service providers in a bid to regulate the market and increase reliability has been approved by the government. From 2026, companies will come under the supervision of the Financial Supervision Authority (Finantsinspektsioon).
The government of Estonia has enacted a bill that introduces stringent legal requirements for digital assets service providers, local media reported on March 21. The legislation — approved on March 20 — is part of the country's efforts to regulate the crypto industry and enhance its reliability.
MiCA emphasizes consumer rights protection, and Estonia keeps pace in this area. Estonian legislation includes high standards for client protection, such as: Right to refund: Companies must have procedures for quick and effective refunds to clients in case of issues.
The Property (Digital Assets etc) Bill, introduced in Parliament today, will mean that for the first time in British history, digital holdings including cryptocurrency, non-fungible tokens such as digital art, and carbon credits can be considered as personal property under the law.
Countries like Singapore, Switzerland, Malta, Estonia, and Portugal are renowned for their favourable regulations and supportive government policies, making them the best crypto-friendly countries.
How is crypto taxed in Estonia? In Estonia, cryptocurrency income is considered gains from the transfer of property and is subject to a 20% income tax rate. All profitable transactions must be declared regardless of the amount of profit incurred.
The Markets in Crypto-Assets (MiCA) regulation is a landmark framework created by the European Commission (EC) that focuses on maintaining financial stability. It also is designed to protect investors and promote widespread transformation in the crypto asset sector in European Union (EU) countries.
It can be expected that the MiCA (Markets in Crypto-Assets) regulation will not only raise the level of security of this type of investment, while increasing consumer protection, but also pave the way for a wider implementation of blockchain technology in financial markets, to the benefit of all.
MiCAR was published in the Official Journal of the European Union on 9 June 2023. MiCAR became applicable to issuers of Asset Reference Tokens (ARTs) and E-Money Tokens (EMTs) on 30 June 2024 and will become applicable to Crypto-Asset Service Providers (CASPs) on 30 December 2024.
Earlier this month, Senate Majority Leader Chuck Schumer (D-N. Y.) told the audience at a "Crypto4Harris" virtual event that he hoped to shepherd crypto legislation through Congress and have President Joe Biden sign the bill into law by the end of 2024.
The MiCA Regulation (Regulation 2023/1114) intends to protect investors and preserve financial stability, while fostering innovation and promoting the attractiveness of the crypto-asset sector.
We cannot fail to mention Portugal as one of Europe's most Crypto-friendly countries. Portugal has widely embraced cryptocurrency and is considered a crypto tax haven with favorable tax policies for crypto users after the Portuguese Tax Authority declared trading and transacting in cryptocurrency tax-free.
Who Is the Crypto Regulator? In the U.S., who regulates crypto depends on how and where it is used. The Securities and Exchange Commission, the Chicago Mercantile Exchange, the Commodity Futures Trading Commission, and the Financial Industry Regulatory Authority are all involved in some regard.
Consumption of narcotic drugs or psychotropic substances without a prescription, or illegal manufacture, acquisition or possession of small quantities of narcotic drugs or psychotropic substances is punishable by a fine of up to 200 fine units or by detention.
Notably, the Financial Conduct Authority (FCA) has implemented various key measures, including: imposing money laundering regulations on cryptoasset exchange and custodian wallet providers. banning the sale of cryptoassets-backed Exchange Traded Notes (cETNs) and crypto derivatives to retail consumers.
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