Last week, the Estonian government took a significant step towards regulating the cryptocurrency market by approving the introduction of operational requirements for cryptocurrency service providers. The goal is to ensure the reliability of the market and reduce excessive risks, thereby better protecting investors' money.
Cryptocurrency markets in the European Union are currently not uniformly regulated, leading to several scams and affecting the credibility of the market.
As you already know, MiCA has established uniform rules for market participants throughout the European Union. This means that cryptocurrency service providers can offer their services on the same basis in all member states and must disclose information in the same way as in the case of shares and bond offers.
☝ Under the MiCA adoption legislation, service providers will be required to provide comprehensive information to investors before involving money. This will be enforced by the Estonian Financial Supervision Authority ( 🇪🇪 Finantsinspektsioon), which will supervise cryptocurrency service providers in Estonia.
Presently, cryptocurrency services are referred to as virtual currency services, and to offer such services in Estonia, a license must be obtained from the Financial Intelligence Unit (FIU).
The FIU license allows for continued operations until January 1, 2026.
After that, the broader term "cryptocurrency" will be used instead of virtual currency, and to continue operating, the cryptocurrency service must comply with the requirements of the MiCA regulation, and a license must be obtained from the Finantsinspektsioon.
The new rules will enable crypto investments through an investment account from 2025, which will be subject to clear rules and supervision.
The new law requires an activity license for the provision of cryptocurrency services, and the service must be offered in the form of a private limited company (OÜ in 🇪🇪 ) or a public limited company (or AS in 🇪🇪 ).
To mitigate risks, the board of the cryptocurrency service provider must have at least two members.
The draft lowers the threshold for the securities prospectus requirement, which could promote the development of the Estonian capital market. Previously, companies wishing to raise capital through shares or bonds in an amount greater than 5 million euros had to prepare a voluminous and expensive securities prospectus.
The lowered threshold means preparing a simpler information document instead of a securities prospectus for issues of less than 8 million euros.
🙌 Overall, the new requirements will generally apply by the end of 2024. We encourage all current VASPs to start with preparation for transition under MiCA and use professional help to get the CASP license secured.