Cryptocurrencies bear the brunt of Estonia’s fight against dirty money – POLITICO

Click play to listen to this article

In a country plagued by dirty money scandals, Estonia is determined to stop cryptocurrencies from providing illicit financiers with a new laundromat.

Estonia’s latest attempt to eradicate white-collar crime will get underway on Tuesday, when Tallinn’s amendments to the Prevention of Money Laundering and Terrorism Act come into effect – with the watch closely watched by international community. And many initiatives are on the way.

The Estonian banking sector has repeatedly humiliated the government by transferring billions of dollars in questionable funds to clients based in Russia. There is no way for that to happen again through cryptocurrency, which involves the country’s treasury and financial intelligence unit.

“We welcome innovation, but for us it is clear that we will not and cannot tolerate any financial crime and preventing money laundering is certainly a political priority.” Estonian Finance Minister, Keit Pentus-Rosimannus, told POLITICO.

The new rules reinforce the licensing process that most in the Estonian crypto market agree is too lax. The first licensing regime that appeared in 2017 has made it easy for hundreds of companies to obtain an Estonian license and operate from anywhere in the world. Some companies are even in business by selling shell companies.

“Surveillance is simply not possible,” the minister said. “But the risk is ours because they operate with an Estonian license. It’s a thing that has been changed by law. “

Tallinn’s decision to tighten the surveillance leash now comes as little surprise to the industry, which is kicking off broader efforts to deter bad actors and try to dispel concerns that Russia and Belarus are using Using cryptocurrencies to evade Western sanctions.

The government is under pressure to perform as Council of EuropeThe Expert Committee on the Evaluation of Measures Against Money Laundering and the Financing of Terrorism (MONEYVAL) is undergoing a two-year audit of the country’s measures to protect dirty money. The periodic audit, which ends this December, is also looking at how digital assets are managed. A team of auditors will arrive in Tallinn on April 25 for a two-week visit.

Estonia could face severe consequences if it does not live up to MONEYVAL’s expectations. Violating countries may end up with the world’s dirty money gray listwhich include Malta. The resulting stigma has a track record to ward off foreign investors from an offending country.

As a result, Tallinn is not disruptive. The new rules are designed to make the market in Estonia as uncomfortable as possible for illegal financiers to work or abuse.

One technique is to make market entry expensive. Companies that offer digital wallets and online exchanges will soon have to put up a capital requirement of at least €100,000 for an Estonian license. Companies that hold and move cryptocurrencies for everyone will need to deposit a minimum of €250,000.

The amendments also come with high registration fees, strict accountability, and tighter regulatory oversight. Part of the companies’ business infrastructure will also have to be located in the Baltic country.

Pentus-Rosimannus and aides to the treasury acknowledge that the MONEYVAL audit and Estonia’s verifiable past played an important role in the government crackdown. But in general, the measures are designed to enhance transparency in the cryptocurrency market and protect honest players, according to the minister.

Just a flesh wound

However, as Estonian cryptocurrencies see, Tallinn is using a butcher’s knife to treat wounds in the flesh, undermining the country’s reputation as a fintech-friendly business environment.

The heavy-handed approach is also surprising EU lawmakers, as it is halfway through the development of a bill, called MiCAit contains less stringent standards – and Estonia will eventually have to adopt those in any case. The European Commission has suggested that MiCA’s capital requirements, for example, range from €50,000 to €150,000, depending on the crypto company’s offerings (the largest operators will need more). ).

The nature of Estonia’s crackdown is a clear reflection of the pressures coming from continued international scrutiny and the dirty money scandals the country has endured, according to industry representatives.

The law “was only implemented in a panic, stemming from the MONEYVAL review of Estonia as they were looking to commit crimes other than the banks,” Raido SaarChairman of the board of directors of the Estonian Crypto Association.

“In the past two years, our regulatory environment has been changed twice and there has been a third time [underway] government, has revoked all those permits,” he lamented, referring to a separate piece of legislation scheduled for a later date. We need to restart our license for financial check. “

For its part, the treasury said no decision has been made on that particular bill. Called the Crowdfunding, Other Investment Instruments and Virtual Currency Act, it is still in the early stages of drafting.

However, the idea of ​​a complete overhaul in the future, grateful with Matis Mäekerhead of the Estonian FIU – a financial conduct regulator that all EU countries must have.

In Mäeker’s eyes, if Estonia doesn’t act, it could trigger another Danske Bank scandal, in which 6,000 “non-resident” customers raked in around €200 billion through the company’s Estonian branch. Danish lenders between 2007 and 2015, most of which were deemed suspicious.

It is this kind of rhetoric that has companies fearful of what else could happen on the legislative track. Attorney at SorainenThe firm, which provides specialized legal advice on fintech, also questioned whether the Estonian authorities would use the new discretionary powers to revoke licenses without justification.

Do not waste time

For his part, Pentus-Rosimannus refused to sit idly by until the MiCA arrived.

“We have risks right now, and obviously we have to address them now. We simply cannot wait any longer,” she said. “We are not an option to wait until all that discussion [in Brussels] to get to the end. We had to react immediately.”

The industry believes that the new rules will go far in weeding out any money launderers in the country’s cryptocurrency market. It was only a matter of time before authorities discovered a shell company, on the other side of the world, offering suspicious activity with an Estonian license, it said.

That said, the government could have handled its communication strategy better Sten Tamkivi, an Estonian entrepreneur and technology investor who has worked as an executive at Skype for over eight years. He hopes that the government’s good intentions will not damage the country’s reputation as a haven for startups.

“There has been a lot of buzz around Christmas and New Year around the world, with false claims that Estonia either bans Bitcoin or does not allow self-circulation,” he said. “I just hope the messy short and medium term doesn’t distract us too much.”

This article is part of POLITICO Pro


A one-stop solution for policy professionals that combines the depth of POLITICO journalism with the power of technology


Exclusive, disruptive and detailed information


Custom Policy Intelligence Platform


High level public relations network

blank Cryptocurrencies bear the brunt of Estonia's fight against dirty money - POLITICO

Fry Electronics Team

Fry is an automatic aggregator of the all world’s media. In each content, the hyperlink to the primary source is specified. All trademarks belong to their rightful owners, all materials to their authors. If you are the owner of the content and do not want us to publish your materials, please contact us by email – The content will be deleted within 24 hours.

Related Articles

Back to top button