Enforcement of last year’s amendment to Estonia’s anti-money laundering (AML) and countering the financial of terrorism (CFT) regulation has resulted in a dramatic drop in the number of licensed cryptocurrency service providers. As of May 1, 2023, there were only 100 crypto firms with operating licenses, which is an 80% drop from 489 as of March 15, 2022, when the amended Money Laundering and Terrorist Financing Prevention Act came into force.

According to the Estonia Financial Intelligence Unit (FIU), a total of 389 operating licenses have been withdrawn either voluntarily or based on its action. Of this number, nearly 200 were withdrawn by the companies while about the same number were revoked by the financial transactions watchdog.

Watchdog Finds 'Lot of Suspicious Circumstances'

FIU explained that it found 'a lot of suspicious circumstances' in crypto firm’s license applications following tougher checks in line with the amended regulation.

“This calls into question the credibility of the businesses that wanted to come here and their actual desire to provide services in Estonia,” said Mäeker in a statement. “It also shows the desire of some individuals to use the Estonian economic system and financial system for illegal activities.”

Providing more details on its findings, FIU noted in a number of cases that it had identified individuals appointed as Board Members or contact persons without their knowledge. Some of these persons had their CVs forged while others lacked proper business reputations.

Furthermore, the independent agency noted that business plans submitted by a number of companies overlapped in areas such as financial forecasting. They also contained typos and lacked any logic. In fact, many of the firms patronized the same legal or corporate service providers, the regulator said.

“When renewing operating licences, we saw situations that would raise an eyebrow at every supervisor," noted Mäeker.

On top of this, FIU noted that it will continue reviewing the operational licenses of crypto firms. On top of that, it hopes it will be able to return to normality in terms of supervision, where we will move from a largely paper-based assessment to daily on-site supervision.

Estonia: Top Crypto Destination

Estonia, a country in Northern Europe, is considered one of the most crypto-friendly countries in the continent alongside Switzerland, Denmark, Germany and Slovenia. As of the summer of 2021, when Matis Mäeker, FIU’s new head, came into office, about 650 crypto services licenses were valid in the Baltic nation, the regulator said.

However, in recent years, the country's regulators have been cracking down on crypto firms. In 2020, regulators revoked licenses of 500 cryptocurrency firms, translating to roughly 30% of the total approved providers at the time. The move came as a series of scandals in Europe undermined trust in authorities’ ability to tackle money laundering.

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