Estonia recently made radical modifications to its Terrorist Financing Prevention and Anti-Money Laundering laws in March, with nearly 400 Virtual Asset Service Providers (VASPS) shutting down either voluntarily or being coerced to shut down following the revocation of their authorization. The amendments came in the form of expansion of the predefined purview of VASPS, firms to necessarily have legitimate links to the nation, a hike in the licensing fees and capital and mandatory requirement of reporting. This was also accompanied by the introduction of the Financial Action Task Force Travel Rule.
The vast amendments drew sharp reactions in the form of almost 200 indigenous crypto service firms ceasing to operate and voluntarily shutting down many similar services as noted by the Estonian Financial Intelligence Unit (FIU) on May 8. Along with voluntary shutdowns, about 189 crypto services had their authorization revoked due to defiance or violation of the guidelines of the newly formulated laws. The modus Operandi of service providers which were in flagrant violation of the terms of the new laws was brought to a halt as it was viewed as a threat to the economy and was certainly a risk to let their operation continue. According to Matis Maeker, the Director of the Financial Intelligence Unit “In lieu of this, the legislator’s response to increased supervision seems appropriate.” He further adds that the renewal process could leave every supervisor flabbergasted.
In the aftermath of the clear-out, 100 legally registered active crypto firms remained which were registered in Estonia as of May 1, as reported by FIU. A vast majority of the companies that were forcibly shut down showed a similar faulty pattern of providing misleading company information. To name a few, a lot of companies had registered members on their Boards and various company contacts that were unknown even to the actual individual themselves. Others mentioned a number of members in their books who bore false witness with regard to their professional backgrounds on their resumes. These were a few out of a sea of faulty and misleading information that led the Estonian Government to take charge of shutting them down.
It was also mentioned that some companies had simply copy-pasted everything from others, even down to their business models, business plans and mode of operation, which eventually lacked any logical connection with the nation whatsoever.