Recent Cryptocurrency Exchanges Uncertainty - Is the Estonian Licenses-Party Over?
Just as much as 9/11 has mounted the end of certain parts of the traditional banking, Anti Money Laundering (hereinafter- AML) and Counter Terrorist Financing (hereinafter- CTF), July 1st 2020 has declared the end of the relatively easy-to-access crypto exchange licenses in the EU.
The recent uncertainty and regulatory turbulence that the EU has been experiencing in the past few months have been accounted to the fact that certain EU Member States have not transposed 5 AMLD into national law.
This comes as a significant challenge to Member States who wish to allow formation of crypto currency ecosystems in their jurisdiction, either in the form of a crypto exchange, or in a form of a different financial license.
Yet, lately it seems that the notion of a cryptocurrency license may become a notion of the past. This hybrid and almost mythical creature, especially in the Estonian version, has managed to enable many companies to create an exchange platform for the exchange of fiat currency into crypto currencies.
In addition to the e-wallet license that enabled custody of digital currencies. Be that as it may, currently the new conditions imposed by the Financial Intelligence Unit (hereinafter- FIU) in Estonia, have created a unique entanglement in which many crypto exchanges are having their licenses revoked due to non-compliance to the new conditions. Furthermore, the FIU has begun to request directors to report at the FIU’s headquarters for interviews, in addition to regulatory inspections and inquires that are issued on a prompt basis.
Hence, maintaining a crypto exchange license has become increasingly difficult in many regulatory aspects, that have affected operations of platforms on a daily basis. It now seems that platforms are in need of finding a different regulatory solution for their operations, in addition to banking access.
Maintaining a crypto exchange in this day and age, especially in the Estonian version and regulatory speaking, requires due diligence and compliance methodology that competes with maintaining an small payment institution (hereinafter-SPI) or even in some cases an Electronic Money Institution (hereinafter- EMI).
Hence, exchanges that have recently tried to apply for the new crypto currency license in Estonia, should consider shifting their focus on a more established financial license, which will enable them a more sound access to the traditional banking industry, similar compliance and AML practices and access to the EU Market.
By Ella Rosenberg, September 10, 2020
Ella Rosenberg is an EU Regulatory Consultant. She consults on AML in the crypto currency industry, construction and defense/ HLS industry, Blockchain, AI, drone regulation, EU firearms regulatory framework, Art industry, financial investigations and tokenisation of maritime logistics.