The Impact of Estonia Passing Legislation to Shift Crypto Oversight to Financial Supervision Authority

The Impact of Estonia Passing Legislation to Shift Crypto Oversight to Financial Supervision Authority

In a significant move, the Estonian government has approved legislation that will transfer oversight of the crypto industry to the Financial Supervision Authority (FSA) starting in 2026. The primary objective of this bill is to regulate local crypto service providers more effectively, thereby bringing stability to the emerging market. The proposed law will introduce stricter operational and reporting requirements for these businesses, with the aim of mitigating financial crimes such as cyber thefts and crypto business bankruptcies.

One of the key implications of this legislative change is that crypto businesses will now fall under the purview of “real financial supervision,” according to Matis Mäeker, the head of the Financial Intelligence Unit (RAB). Previously, the Estonian regulator only focused on anti-money laundering (AML) measures, neglecting other significant financial risks associated with the crypto sector. With this new framework in place, crypto companies will be required to comply with stringent standards for managing client assets and implementing systems to safeguard customers’ funds.

Minister of Finance Mart Võrklaev has emphasized that crypto companies operating in Estonia must obtain licenses from the FSA by 2026. Even businesses that already hold licenses from the Financial Intelligence Unit will be obligated to secure a new license from the FSA. Furthermore, the penalties for breaching AML regulations under the financial law will see a significant increase from the current limit of 40,000 euros ($43,450) to a maximum of 5 million euros ($5.2 million) under the proposed law.

By implementing these regulatory changes, Estonia aims to harmonize its crypto industry standards with the European Union’s Markets in Crypto-Assets (MiCA) regulations. The MiCA framework, which was enacted last year and is scheduled to come into force this year, sets out comprehensive guidelines for regulating crypto activities within the EU. Estonia’s proactive approach to legislation, coupled with its favorable tax regime, streamlined licensing procedures, and dynamic fintech ecosystem, positions the country as a favorable destination for crypto businesses seeking a competitive advantage in the global market.

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