Estonia Releases Amended Legislation to Regulate VASPs

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The government of Estonia has reportedly moved to approve draft legislation curated “to more effectively regulate virtual asset service providers (VASPs).” According to an explanation by the Finance Ministry of Estonia on Sunday, the primary goal of this legislation is to dampen the risk of financial crime perpetrated through crypto entities registered and operational in the Baltic nation.

The revised draft law mandates VASPs to identify their customers in a manner that their identities are attached to all their transactions. This draft law comes on the heels of a recent ban on open anonymous virtual accounts introduced in 2020 after the nation’s crypto-friendly stance attracted several entities seeking license approval.

The finance ministry clarified that the legislation would not affect residents who own digital assets through a private wallet not provided by a VASP. The ministry added that it does not require crypto holders to divulge their private keys. However, Estonia-based crypto service providers cannot offer anonymous accounts or wallets.

Furthermore, the ministry emphasized that the proposed measures are the same as the rules applied to the payments and banking sector. The new draft (amendment) alters the recommendations forwarded by the Financial Action Task Force on Money Laundering (FATF) to the Estonian law. These recommendations define some digital asset services that do not exist under the Baltic nation’s current legislation.

Estonia to Disallow Resale of Licenses

Meanwhile, a critical aspect of the new law requires companies to link their operations with Estonia to obtain a license. The recent boom in applications came following a phrase that allowed applicants to sell their licenses to third parties. The supervision of this rule has proven difficult prompting authorities to make a U-turn and that under the new rule, the nation’s Financial Intelligence Unit (FIU) holds the power to decline such applications.