Estonia has seen a significant drop of 80% in the number of registered crypto firms after it implemented a new law to prevent money laundering. The Financial Intelligence Unit, the money laundering regulator in the country, has revealed that the number of valid authorizations has decreased to just 100 from the previous 389 due to the new law.
The law in question is the Money Laundering and Terrorist Financing Prevention Act, with amendments to it coming into effect on March 15, 2022. Since then, around 200 crypto firms voluntarily abandoned their authorizations. Another 189 authorizations were revoked by the FIU due to non-compliance with the new requirements introduced in the amended Act.
According to the Director of the Financial Intelligence Unit, Matis Mäeker, the response of the legislator to the amendments to the Act and the supervision activities both before and after the amendments have been relevant. The documents submitted by the firms that lost their authorization showed this.
Estonia is known for being friendly to tech startups, including crypto firms. However, it has faced reputational risks due to money laundering scandals and crypto scams. The country has been working towards repairing its reputation by tightening its money laundering laws and making it mandatory for crypto firms to reapply for licenses.
The regulator stated that it “saw situations that would surprise every supervisor” when renewing authorizations. These included identical business plans by applicants, management board members who were unaware of their appointments, falsified CVs, and other issues. Additionally, many of the firms submitted their applications using the same legal or company services providers.
The regulator plans to continue reviewing authorizations but expects it to return to “normality in terms of supervision.” Despite the drop in registered crypto firms, the new law is expected to have a positive impact on Estonia’s reputation and its efforts to prevent money laundering and crypto scams.