Estonia’s government distributes FAQs in response to concerns about new crypto regulations

<p>Estonia has circulated a series of frequently asked questions (FAQs) in an attempt to allay concerns that its recently approved crypto legislation equates to a ban.</p> <p>The stricter requirements are in response to the Financial Action Task Force's (FATF) recommendation that nations adopt stricter anti-money laundering standards for VASPs.</p> <p>The legislative proposal seeks to regulate cryptocurrency entities, also known as virtual asset service providers (VASPs), in the same way that traditional financial institutions and payment platforms are regulated. It supplements Estonia's 2020 prohibition on the opening of anonymous virtual accounts by broadening the definition of VASP and subjecting VASPs to a stricter anti-money laundering standard.</p> <p>Essentially, VASPs will be responsible for collecting and transmitting know-your-customer data and will be prohibited from opening anonymous accounts, a technique used to target noncustodial wallets. Additionally, they must obtain a VASP licence for 10,000 euros — an increase from the previous fee of 3,300 — and meet capital requirements, as well as pay a supervision fee of 1% of share capital and 0.035 percent of all virtual asset transactions. According to the FAQ, this is to deter dormant entities from registering.</p> <p>Some expressed concern that the requirements amounted to a prohibition on owning cryptocurrency or using a noncustodial wallet. During the draught stage of the FATF's guidance, the industry expressed similar concerns, arguing that depending on how the recommendations are implemented, nations may use them to justify prohibiting decentralised finance or noncustodial entities. If this is the case, the DeFi space may become isolated, with no compliant method of transferring funds between centralised and decentralised entities.</p> <p>Estonia's FAQ made it abundantly clear that it has no intention of imposing a ban. AML regulations do not apply to individuals or private wallets established without the assistance of a service provider. Citi