Estonia Moves to Reassure Crypto Sector as New Rules Weighed

(Bloomberg) -- Estonia has moved to calm investor fears about tougher rules on cryptocurrency, a sector which has been a target of regulatory scrutiny for the Baltic nation since at least 2019.

The country is considering new rules that would enforce due diligence, audits and higher levels of capital for crypto firms ahead of a review of its money laundering policies this quarter. The proposed rules still need parliamentary approval.

The Estonian Finance Ministry issued a statement and a FAQ after speculation the new rules would shut down crypto wallets and ban trading in Bitcoin. Estonia “recently introduced draft legislation that would tighten regulation of virtual asset service providers,” the finance ministry said in a statement. “However, Estonia has no plans to make owning cryptocurrencies illegal, as some misconceptions on social media claim.”

The Baltic nation was one of the first countries to grant cryptocurrency licenses in 2017, attracting a surge in companies interesting in doing business in the sector. It has since revoked about 2,000 of these and only around 400 licensed companies remain. Estonia took a tougher stance on crypto after allegations that billions of dollars of illicit cash flowed through the local unit of Denmark's largest lender Danske Bank A/S, in what was then Europe's biggest ever dirty-money scandal.

Matis Maeker, the director of Estonia's Financial Intelligence Unit told local media in October that all crypto licenses could be revoked and companies forced to reapply for accreditation. His spokesman later said that this was not the official view of the FIU and the government did not pursue it.