After a multi-billion-dollar scandal, the country is taking significant steps to enhance AML measures
In an effort to crack down on illicit financial transactions and criminal activity after an Estonian Branch of the Danske Bank was involved in a $220 billion money-laundering scandal, the country has cancelled the licenses of 500 cryptocurrency companies.
The number closed of firms represents over 30 percent of total crypto-related businesses in the country.
Madis Reimand, head of the Estonian Financial Intelligence Unit (FIU), explained that the move was a pre-emptive strike to clean up the industry. However, he also emphasised that the move is focused on tightening regulations to address money laundering risks, not to cripple the sector.
While they were revoking licenses, the FIU targeted firms that did not start their operations within the next six months after they were issued their license. According to this article by Bloomberg, Estonian regulators were concerned that crypto firms, particularly crypto exchanges, may have been used to facilitate illegal transfers on their platforms.
“This is a first step in tidying up the market, allowing us to take care of the most urgent issues by permitting operations only for companies that can be subjected to Estonian supervision and coercive measures.” Reimand said.
Estonia, a Baltic state in northeastern Europe, was recently thrust into the spotlight when the multibillion-dollar scandal was uncovered. Denmark’s biggest lender, Danske Bank, had a small Estonian branch that was accused of facilitating over $223 billion in laundered money.
This incident undermined the ability of the small nation’s monetary authorities to handle money laundering risk. The crackdown has been enforced to ensure that the local cryptocurrency industry will not be used in illicit financial activities, as the entire sector is classified as high risk.
Before the mass revocation of licenses, Estonia was considered as a haven for cryptocurrencies. It was one of the first European nations to liberalise cryptocurrency in 2017. In the three years after, the government issued 1,400 licenses to crypto firms.
These days, the government has restricted the capacity for businesses to obtain crypto licenses as part of its efforts to mitigate the risk of money laundering. The processing time for permits is now three months; three times as long as the 30 days it previously took. In addition, the cost of obtaining a licence has gone up to €3,300 ($3,710 USD), a significant hike from the previous €300 fee.