Back in 2017, Estonian When the government introduced a series of new laws aimed at supporting encryption projects, the government shocked the legislative aspects of the encryption world. These licenses are divided into two different categories: those that wish to operate cryptocurrency exchanges and those that wish to conduct initial token issuance. Both types of companies will benefit from the first “real” cryptocurrency license anywhere on the planet.
With these permits, entrepreneurs flocked digitally to this small and great Baltic country. The Estonian government is in a leading position in many ways. The country is not only a pioneer with encryption licenses, but also provides citizens of any country with the ability to obtain a “digital residence”. This digital residence allows entrepreneurs to legally find themselves or their companies in Estonia, making it easier for them to obtain the required encryption licenses even if they do business elsewhere in the world.
This ultra-modern combination of digital residence and the capabilities of licensed cryptocurrency companies has impressed almost everyone in the crypto industry, especially those seeking transparency and security. Just half a year ago, there were about 2,000 companies obtain Since Estonia began issuing cryptocurrency licenses (this figure is based on all issued cryptocurrency licenses).
Fast forward three years, until January 2020, the Estonian government began to deploy new rules related to companies that have issued licenses and companies wishing to apply for cryptocurrency licenses. These laws have changed the prospects of cryptocurrency licenses provided by Estonia And attractive.
These new measures are strategically implemented by the new European Union Know your customer law The previous year by the legislator. In short, these new laws require member states to regulate the operations of companies operating in the cryptocurrency industry. The overall goal of these new laws is to stop money laundering in relatively unregulated industries. Usually, regulators and financial institutions usually regard it as the main focus of cryptocurrency.
However, many observers pointed out that Estonian law has already met the new requirements of the European Union. So why should they enforce the new rules?
Under the “old” licensing law, companies that require licensing must appoint KYC personnel responsible for operations-essentially compliance officers. This person must provide proof of their local police authority to prove that the background is clean. In addition, at least one director is required to be a resident of the European Union and an Estonian company must have a registered address in Estonia. This standard requirement for financial licenses is very attractive, especially if it only costs about US$400 to obtain.
When the new EU laws are placed side by side with the old Estonian laws, one can see that they are almost parallel in requirements.
However, the new Estonian law imposes heavy and overly complicated regulatory obligations on companies wishing to self-regulate in the cryptocurrency sector. Estonia seems to be undergoing a huge shift in trying to attract those who are licensed. If the old Estonian licensing laws are designed to attract new startups with tight budgets, the new licensing laws are designed to keep them out.
Now, the obligations of companies wishing to retain or obtain an Estonian encryption license include elements such as local resident directors, local offices and fees of $3,700. This is completely different from the company’s previous price and obligations. These new requirements do not seem to be burdensome in themselves. Naeem Aslam, a professional financial trader from London, conducted some research on the conditions required to retain a license issued by Estonia and noted:
“Currently the cheapest of the companies that provide compliance services in Estonia, with monthly charges exceeding $1,500, including a one-time payment to meet compliance requirements.”
He went on to explain that in his research, “some of the companies contacted simply mentioned that they withdrew from the Estonian market and were unable to provide assistance or give prices.”
This means that the reality facing the company is that the annual fee is between $18,000 and $20,000. Naturally, as anyone who has worked in a start-up company will agree, the price of the license alone can be obtained at a quarter of the price in another jurisdiction, which is not a tempting or realistic prospect .
As a result, the number of crypto companies leaving Estonia has skyrocketed. Many people are looking for new UK Financial Conduct Authority encryption licenses or elsewhere in the world, such as countries that provide various “sandbox” licenses.
After comparing the encryption method and the new European law, many people think that the reason for the increase in fees is just to grab money. The Estonian government has been working hard to use its status as a country, which has a large number of companies with these licenses, trying to increase revenues for regulators and the domestic economy. As many people suspect, if this is a general idea, then it seems to be counterproductive.
Although many people cannot blame Estonia for seeking to take advantage of its newly discovered popularity in the crypto market, doing so will ultimately benefit Estonian citizens. Unfortunately, its plan to amend the law seems to have become so cumbersome that the company just left for other licenses and was reluctant to comply.
The opinions, ideas and opinions expressed in this article only represent the author’s personal and do not necessarily reflect or represent Cointelegraph’s views and opinions.