How Will the New Estonian Framework Impact Its Crypto Exchange Market?
- Will Estonia continue to be one of the world's friendliest crypto countries?
Since the beginning of the banking renaissance and the establishment of Fintech as an independent banking field, crypto exchanges have tried to find the appropriate license that will enable them to conduct their business with a minimum level of Regulation Regulation Like any other industry with a high net worth, the financial services industry is tightly regulated to help curb illicit behavior and manipulation. Each asset class has its own set of protocols put in place to combat their respective forms of abuse.In the foreign exchange space, regulation is assumed by authorities in multiple jurisdictions, though ultimately lacking a binding international order. Who are the Industry’s Leading Regulators?Regulators such as the UK’s Financial Conduct Authority ( Like any other industry with a high net worth, the financial services industry is tightly regulated to help curb illicit behavior and manipulation. Each asset class has its own set of protocols put in place to combat their respective forms of abuse.In the foreign exchange space, regulation is assumed by authorities in multiple jurisdictions, though ultimately lacking a binding international order. Who are the Industry’s Leading Regulators?Regulators such as the UK’s Financial Conduct Authority ( Read this Term, whilst still adhering to the regulatory framework.
The Estonian licenses that were issued up until the beginning of 2019 have proved to be the easiest license to comply with, and have served thousands of licenses in Estonia.
Yet, recently the tide has shifted in the Baltics, and especially in Estonia. 5 AMLD that was supposed to be fully implemented by January 2020 in all Member States in the European Union has taken a very heavy toll on the local regulators. Member States that will be deemed non-compliant will have to 5 AMLD will be held in breach of EU Law, which will result in proceedings against the EU Commission in front of the CJEU.
Certain Member States have already been issued warnings by the EU Commission, such as the Netherlands, Spain, Portugal, Slovenia, Romania, Slovakia, Hungary and Cyprus. Estonia clearly does not want to appear in such a star-studded list, which have left local regulators with severe consequences.
Hence, it was inevitable that Estonia, with the vast amount of crypto Exchange Exchange An exchange is known as a marketplace that supports the trading of derivatives, commodities, securities, and other financial instruments.Generally, an exchange is accessible through a digital platform or sometimes at a tangible address where investors organize to perform trading. Among the chief responsibilities of an exchange would be to uphold honest and fair-trading practices. These are instrumental in making sure that the distribution of supported security rates on that exchange are effectiv An exchange is known as a marketplace that supports the trading of derivatives, commodities, securities, and other financial instruments.Generally, an exchange is accessible through a digital platform or sometimes at a tangible address where investors organize to perform trading. Among the chief responsibilities of an exchange would be to uphold honest and fair-trading practices. These are instrumental in making sure that the distribution of supported security rates on that exchange are effectiv Read this Term licenses that were issued, will take the lead in amending their crypto regulations and guidelines in that regard.
The purpose of the new framework stems from the 5th AML Directive implementation in each Member State, which has completely changed the EU to an indistinguishably new Market that is facing unchartered waters, specifically within the realm of AML. Crypto Exchanges operating and licensed in Estonia are encouraged to adapt to the new framework or risk revocation of their license.
Crypto exchanges that have obtained the license prior to the new conditions will not only have to comply to the new conditions such as local AML officer, local director, physical presence and raise in the share capital but in certain will also have to expect an invitation to the FIU for further clarifications. The list above is non- exhaustive, and the FIU is able to ask for additional documentation and proof of integration to the Estonian market.
It seems that the era of smoother and wrinkle-free licenses in the EU has ended, and the era of heavier regulation has embanked on the shores not only of the continent but also on the realm of the FATF. Banking renaissance, like any sort of renaissance, encompasses many challenges for the spearheading individuals and companies, such as cryptocurrency exchanges. What will remain is not only a question to the regulator but to the companies as well, that will now have to learn to collaborate better with the Member State Regulators.
Ella Rosenberg is an EU Law Regulatory Consultant at the Porat Group and CEO of the Israel-EU Chamber of Commerce and Industry
Since the beginning of the banking renaissance and the establishment of Fintech as an independent banking field, crypto exchanges have tried to find the appropriate license that will enable them to conduct their business with a minimum level of Regulation Regulation Like any other industry with a high net worth, the financial services industry is tightly regulated to help curb illicit behavior and manipulation. Each asset class has its own set of protocols put in place to combat their respective forms of abuse.In the foreign exchange space, regulation is assumed by authorities in multiple jurisdictions, though ultimately lacking a binding international order. Who are the Industry’s Leading Regulators?Regulators such as the UK’s Financial Conduct Authority ( Like any other industry with a high net worth, the financial services industry is tightly regulated to help curb illicit behavior and manipulation. Each asset class has its own set of protocols put in place to combat their respective forms of abuse.In the foreign exchange space, regulation is assumed by authorities in multiple jurisdictions, though ultimately lacking a binding international order. Who are the Industry’s Leading Regulators?Regulators such as the UK’s Financial Conduct Authority ( Read this Term, whilst still adhering to the regulatory framework.
The Estonian licenses that were issued up until the beginning of 2019 have proved to be the easiest license to comply with, and have served thousands of licenses in Estonia.
Yet, recently the tide has shifted in the Baltics, and especially in Estonia. 5 AMLD that was supposed to be fully implemented by January 2020 in all Member States in the European Union has taken a very heavy toll on the local regulators. Member States that will be deemed non-compliant will have to 5 AMLD will be held in breach of EU Law, which will result in proceedings against the EU Commission in front of the CJEU.
Certain Member States have already been issued warnings by the EU Commission, such as the Netherlands, Spain, Portugal, Slovenia, Romania, Slovakia, Hungary and Cyprus. Estonia clearly does not want to appear in such a star-studded list, which have left local regulators with severe consequences.
Hence, it was inevitable that Estonia, with the vast amount of crypto Exchange Exchange An exchange is known as a marketplace that supports the trading of derivatives, commodities, securities, and other financial instruments.Generally, an exchange is accessible through a digital platform or sometimes at a tangible address where investors organize to perform trading. Among the chief responsibilities of an exchange would be to uphold honest and fair-trading practices. These are instrumental in making sure that the distribution of supported security rates on that exchange are effectiv An exchange is known as a marketplace that supports the trading of derivatives, commodities, securities, and other financial instruments.Generally, an exchange is accessible through a digital platform or sometimes at a tangible address where investors organize to perform trading. Among the chief responsibilities of an exchange would be to uphold honest and fair-trading practices. These are instrumental in making sure that the distribution of supported security rates on that exchange are effectiv Read this Term licenses that were issued, will take the lead in amending their crypto regulations and guidelines in that regard.
The purpose of the new framework stems from the 5th AML Directive implementation in each Member State, which has completely changed the EU to an indistinguishably new Market that is facing unchartered waters, specifically within the realm of AML. Crypto Exchanges operating and licensed in Estonia are encouraged to adapt to the new framework or risk revocation of their license.
Crypto exchanges that have obtained the license prior to the new conditions will not only have to comply to the new conditions such as local AML officer, local director, physical presence and raise in the share capital but in certain will also have to expect an invitation to the FIU for further clarifications. The list above is non- exhaustive, and the FIU is able to ask for additional documentation and proof of integration to the Estonian market.
It seems that the era of smoother and wrinkle-free licenses in the EU has ended, and the era of heavier regulation has embanked on the shores not only of the continent but also on the realm of the FATF. Banking renaissance, like any sort of renaissance, encompasses many challenges for the spearheading individuals and companies, such as cryptocurrency exchanges. What will remain is not only a question to the regulator but to the companies as well, that will now have to learn to collaborate better with the Member State Regulators.
Ella Rosenberg is an EU Law Regulatory Consultant at the Porat Group and CEO of the Israel-EU Chamber of Commerce and Industry