In a country where crypto is so integrated into their everyday lives, the Estonian government wants to be proactive and make sure they are doing everything possible to ensure consumer protection.

The “is cryptocurrency legal” is not a question, but rather a statement. The Estonian government has not banned crypto, but they have drafted legislation to tighten regulation.

The Estonian government is not banning crypto, but drafts legislation to tighten regulation

The Estonian Ministry of Finance issued an official explanation of a recently filed draft law that sparked speculations of a cryptocurrency prohibition. 

According to the reply, the law was written and presented in order to strengthen current crypto service provider licensing, and would not impact people who hold and trade cryptocurrencies. It still has to go through three parliament readings.

Aimed towards virtual asset management companies. 

“The rule does not apply to clients, but rather to virtual asset service providers (VASPs) that perform permanent commercial operations for or on behalf of a natural or legal person.” This implies that the law “contains no provisions prohibiting users from holding and exchanging virtual assets and does not force customers to give their private keys to wallets in any manner,” according to the official reply.

Individuals who possess crypto via a private wallet not offered by a VASP, according to the Ministry of Finance, would be unaffected by the new rule, which still has to pass parliamentary hearings. 

“However, accounts created with Estonian VASPs cannot be anonymous, and Estonian VASPs cannot provide anonymous accounts or wallets,” the statement said, adding that “identifying information must be preserved in a manner that allows it to be connected to the transaction, similar to bank transfers.” 

The most notable changes

“As someone who actively invests, holds, stakes, and pools tokens in DeFi as a resident of Estonia, both privately and through my Estonian companies (for my own use, not for the benefit of others), I see no change or impact to my ability to do so,” said Sten Tamkivi, who joined Skype as an early executive and helped the company grow into Estonia’s first unicorn.

ETHIOPIA IS NOT BANKING CRYPTOCURRENCY.

@rahandus, the Finance Ministry, has issued a reaction to certain nasty speculative allegations that have been circulating since the New Year: https://t.co/WA4t6x2a2k

🧵👇

3 January 2022 — Sten Tamkivi (@seikatsu)

“Estonia is a nation of a million people (so we can really speak to our legislators!) that has created seven Web2 unicorns and has an annual early tech investment run rate of 1 billion EUR in over 1200 firms. Don’t worry, we’ll take care of Web3. After more than eight years at Skype, Tamkivi created his own company, Teleport, which was bought by Topia, the largest global talent mobility platform, in 2017–where he presently serves as Chief Product Officer.

In a lengthy Twitter conversation, Tamkivi attempted to deconstruct the new draft while remarking on the most important changes to the present rule.

Only companies operating in or connected to Estonia can apply for a VASP license, according to the proposed legislation, whereas current rules allow for the resale of licensed companies to third parties.

“Supervising such companies is impossible, and the potential of exploitation puts Estonian VASPs in jeopardy who act in good faith and transparency.” According to the Ministry of Finance, the Financial Intelligence Unit may refuse a license if the firm “does not have any commercial activities in Estonia or has any obvious relationship to Estonia.”

The increased capital requirements are another big change that will impact smaller VASPs. 

VASPs will be required to have a minimum share capital of 125 000 or 350 000 euros, depending on the kind of service given, up from the present floor of 12 000 euros.

The Ministry of Finance said that “this approach would further decrease the danger of registering or holding inactive VASPs for resale,” however such rules “may discourage some very early startup activity,” as Tamkivi pointed out.

Posted in: Estonia, Legislation, Regulation

The Estonian government is not banning crypto, but drafts legislation to tighten regulation

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