Estonia is preparing to implement a new set of anti-money laundering rules that will strengthen the requirements for cryptocurrency companies operating under Estonian licenses. The changes come amid concerns that Russia may be using cryptocurrencies to evade Western sanctions and ongoing audits of the Baltic states' anti-money laundering policies.

Estonian Government Creates Stricter Regulatory Environment for Cryptocurrency Businesses

Estonia's banking industry, which has been involved in processing billions of dollars in transactions for suspicious Russian clients in the past, is now taking steps to close loopholes that could allow Russia, its elite and ally Belarus to evade sanctions imposed as a result of the invasion of Ukraine.

Next Tuesday, the country's revised Prevention of Money Laundering and Terrorist Financing Act will come into force, introducing strict standards. Cryptocurrency companies will bear the brunt of Estonia's war on dirty money, Politico noted in a report.

The update will make Estonia's regulatory regime for platforms operating with digital assets more stringent than the upcoming EU rules. The framework adopted in 2017 was considered too lenient as it allowed hundreds of businesses, many of them located elsewhere, to obtain licenses from Estonia.

In an interview with the publication, Finance Minister Keit Pentus-Rosimannus insisted that Estonia welcomes innovation, but stressed that it will not tolerate financial crime and will make prevention of money laundering a priority. He further commented that.

Supervision is simply not possible. But the risk is ours, because they hold an Estonian license. This is one thing that the law has changed.

Estonian authorities intend to make it more difficult for companies to join its cryptocurrency space. Entities offering digital wallets and online exchange services must meet a minimum capital requirement of €100,000 ($109,000), while those offering custodial services will need at least €250,000.

The new legislation will also introduce higher registration fees, stricter due diligence obligations and more stringent regulatory scrutiny. In addition, unlike before, cryptocurrency companies will be required to maintain a presence in the country.

Tallinn is strengthening its oversight of cryptocurrencies amid an ongoing audit by the Council of Europe's Committee of Experts on the Evaluation of Anti-Money Laundering Measures and the Financing of Terrorism (Moneyval) of the country's safeguards against illicit financial flows.

The auditors, who will complete their assignment in December, are looking at digital asset regulations as well as other policies. Estonia's pledge is high, as the Baltic country could end up on the "gray list" along with Malta, another small EU member trying to become a cryptocurrency-friendly destination.

While policymakers in Brussels are still considering the EU's Market for Cryptocurrency Assets (MiCA) proposal, the Estonian government is strengthening its approach. More importantly, European standards are not expected to be as stringent as Estonia's new regulations. Under the European Commission's proposal, cryptocurrency service providers would have capital requirements of between €50,000 and €150,000.

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