A Guide to Anti-Money Laundering for Crypto Firms

Estonia Cryptocurrency Regulations

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Is Cryptocurrency Legal in Estonia?

  • Cryptocurrencies: Not legal tender
  • Cryptocurrency exchanges: Legal, must register with the Financial Intelligence Unit (supervised by Financial Supervisory Authority).

Estonia cryptocurrency regulations are open and innovative, especially in comparison to other EU member-states. Although not accepted as legal tender, Estonia’s government regards cryptocurrencies as “value represented in digital form”: accordingly, it classifies cryptocurrencies as digital assets for tax purposes but does not subject them to VAT. In 2017, the Anti Money Laundering and Terrorism Finance Act introduced robust new regulations for crypto businesses operating in Estonia.Cryptocurrency regulations Estonia

Cryptocurrency Exchange Regulations

Cryptocurrency exchanges are legal in Estonia and, following amendments to AML/CFT legislation in 2017, have operated under a well-defined regulatory framework that includes strict reporting and KYC and AML rules. In 2019, the government passed Estonia cryptocurrency regulations to tighten licensing requirements and went further in 2020, asserting that virtual currency service providers would be treated in the same manner as financial institutions under the Money Laundering and Terrorist Financing Prevention Act. In late 2020, the Estonian government revoked over 1,000 operating licenses after amendments to Estonian law rendered many cryptocurrency service providers non-compliant with regulations. Up until 2020, cryptocurrency exchanges in Malta had to obtain two licenses from the Financial Intelligence Unit of Estonia: the Virtual Currency Exchange Service License and the Virtual Currency Wallet Service License. After the recent tightening of AML controls the Estonian government merged these two licenses into the single Estonian Cryptocurrency Exchange License. Meanwhile, regulatory responsibility for monitoring and supervising the sector moved to the Financial Supervisory Authority.

Future Estonia Cryptocurrency Regulations

A number of initiatives with potentially significant Estonia cryptocurrency regulation consequences have been mooted in Estonia, including a speculative government plan to introduce a national cryptocurrency known as “estcoin”. After EU criticism, Estonia’s government stepped back from the plan but continues to examine ways to use the estcoin within a government “e-residency” program. Advancing its 2020 objectives, the Estonian Government Anti-Money Laundering Commission stated that it would focus on cryptocurrency oversight in 2021 with “a number of important regulatory changes” planned for the future, including enhancements to customer identification obligations, payments services, and record keeping.

Complying with Estonia Cryptocurrency Regulations

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