Over 1,000 cryptocurrency startups in Estonia lost their license in 2020 after a busy year for the regulator, according to figures emerging from the Ministry of Finance.
At a meeting of the Government Anti-Money Laundering Commission, Finance minister Veiko Tali was quoted saying the figures were evidence digital currency firms required “heightened attention” from regulators to ensure compliance.
It comes after Estonia emerged as an alternative jurisdiction for digital currency companies, providing a licensing regime which had proved popular with regional startups in the sector. After issuing a flurry of licenses in the past year, the authorities have been faced with monitoring and enforcing compliance—often against companies with little tangible connection to the country.
According to Tali, the “means for scrutiny and intervention” available to the authorities has been limited, due to restrictions in Estonian law. However, amended laws introduced earlier this year have given the regulator more powers to hold licensed digital currency operators to account.
“The connection of many of these companies to Estonia is minimal and the clientele of some of the companies is from remote countries.”
Digital currency companies have traditionally found it difficult to manage legal issues arising from the sector, despite growth in the industry. The majority of countries still fail to provide a legal structure for digital currency businesses, with banks worldwide still proving reluctant to serve digital currency clients.
Pioneered in 2019, Estonia’s digital currency licensing plan was designed to encourage startups to locate in the country, in a bid to develop a nascent industry and tax base for the small Estonian economy.
The resulting rush for applications led the Financial Intelligence Unit to flag the heightened risks of money laundering in cryptocurrency over other sectors, culminating in the more aggressive regulation and oversight of recent months.
With over 1,000 licenses since issued and revoked, some 400 companies still hold their license to operate crypto businesses in Estonia