The paradoxical consequence of being the first to regulate a new institute
Updated: Oct 12, 2020
Virtual currencies are already used to a large extent, as of today, there are more than 7,246 different cryptocurrencies with a total market capitalisation $344,393,449,376 (source: CoinMarketCap).
Estonia is among the first countries in the world to regulate crypto service providers activities. On the EU level, Estonia became the first EU country to comply with AML5D requirements on virtual currencies. Implementation of the new regulations obliged crypto exchanges to register their activity with local FIU. Estonia also became one of the first European countries to introduce licence obligation for virtual services companies.
Here are the latest findings of the FIU on virtual currencies licence holders in Estonia , based on a survey carried out at the end of 2019:
Real link with Estonia is limited: business activity, board members, ultimate beneficial owners and clients are located abroad, most of the employees are not in Estonia
Almost 40 % of businesses have a bank account in Lithuania, 25 % in the UK and only 10 % in Estonia
Beneficial owners are from Russia, Latvia or from another Eastern European country
About 0.15 % of all customers are from Estonia. 10% of customers are US citizens, followed by Venezuela, Vietnam, Russia, Brazil, India, Iran, the United Kingdom, China, and Japan
Total turnover in 2018 was 590 million euros and in 2019 already 1.2 billion euros.
In 2018 established relationships with PEPs was 162 and a year later 376
400 SARs were submitted in 2019, it is 5.7% out of all the SARs
39 companies enabled transactions without having a business relationship with the client
Companies tend to use the same official addresses, for instance one apartment claimed to be an official address for 50 companies
Between 2017 to 2019 licence was issued to 1300 companies, however questionnaire was sent to 850 and was responded by 280 (21,5 %).
Earlier this year, new amendments to the regulatory landscape were introduced, with the new rules implemented to effectively cover crypto currencies. As a result, 705 licenses were revoked between 1.3.2020 and 31.7.2020.
In order to bring more transparency to the crypto world and protect the consumers we need a clear set of rules and authority to complain when things go wrong. Increased regulation and collaboration with law enforcement agencies are the path leading to rapid increase in the adoption of digital currencies both now and in the future.
Link to complete survey (in Estonian "Virtuaalvääringu teenuse pakkujate uuring") is available here.