Authorities in Estonia revoked licenses from 189 crypto firms, while around 200 crypto-related companies left the country willingly.
Estonia's tightened Anti-Money Laundering (AML) laws led to the closure of nearly 400 virtual asset service providers (VASPs).
These stricter regulations, implemented in March, broadened the definition of VASPs, mandated legitimate connections to Estonia, and increased licensing fees, capital, and information reporting requirements. Additionally, the amendments introduced the Financial Action Task Force Travel Rule.
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As a result, around 200 domestic crypto service providers willingly closed, and another 189 had their authorizations revoked due to non-compliance, as reported by the Estonian Financial Intelligence Unit (FIU) on May 8th.
FIU Director Matis Mäeker observed that the amendments and supervisory activities were effective in identifying service providers that lost their authorizations. On top of that, Mäeker noted that the re-registration revealed surprising situations that would astonish any supervisor.
Given the documents submitted by the service providers that have lost their authorizations, and their methods of operation and the risks involved, it can be argued that the legislator’s response with regard to the amendments to the Act, and the supervision activities both before and after the amendments, have been relevant.
After the massive crackdown, only 100 active crypto firms were registered in Estonia as of May 1st, according to the FIU.
The FIU identified numerous issues with the companies it shut down, particularly regarding misleading company information. Examples include registering board members and company contacts without their knowledge and falsifying professional backgrounds on resumes. Many companies also appeared to copy identical business plans from each other, lacking any logical connection to Estonia.
Estonia's efforts to strengthen AML laws have been driven by the revelation in 2018 that approximately $235 billion in illicit capital was laundered through Danske Bank's Estonian branch.
Estonia's European Union membership means it will soon need to implement the upcoming Markets in Crypto-Assets (MiCA) laws, scheduled for 2025, which will impose stringent AML and terrorism prevention requirements on crypto firms.
Estonia's reinforced AML laws have made a significant impact on the country's crypto landscape, resulting in the closure of a considerable number of crypto firms.
