Until 2019, the legislation regulating the field of virtual currencies in Estonia was mild and it facilitated the obtaining of activity licenses also for those companies whose connection with Estonia was non-existent or very small. The amendments to the law that came into force in 2020 helped to organize the field somewhat, as last year, the FIU revoked the activity licenses of almost 1,000 companies, the FIU said.

At the same time, the number of applications for new virtual currency activity licenses has started to grow rapidly again this year. As of March 26, there were 453 valid virtual currency service provider activity licenses in Estonia, which is 67 more than at the turn of the year. As of Friday, a total of 88 new permit applications had been submitted to the FIU.

"Unfortunately, the stricter requirements that came into force in Estonia in 2020 for virtual currency providers have not proved to be sufficient and what is happening in the field is still very lacking in transparency. It is important to rapidly reduce the attractiveness of the virtual currency environment for crime, including money laundering and terrorist financing," Marget Lundava, acting head of the FIU, said in a press release.

The field of virtual currencies has grown in recent years from a small niche sector to a large-scale global industry. According to the FIU, the COVID-19 pandemic has also provided an additional impetus for this.

"Virtual currency service providers registered in Estonia move billions of euros a year, probably already more than €10 billion this year. Therefore, it is important for the state to look at these companies more similarly to other companies operating in the financial field," Lundava said.

For example, the number of licenses issued for banking, payment intermediaries, currency exchange and fund managers in Estonia is in the tens, but is almost 500 in the field of virtual currencies. "It is clear that the majority of virtual currency licensed companies are not directed to the Estonian market, as there is simply no such market in Estonia. Our analysis shows that a large part of new permit applicants are foreigners with little or no connection to Estonia," Lundava said.

"Formally, they correctly comply with the current requirements arising from the law, and therefore we have no grounds to refuse to issue an activity license, but the possibilities of the Estonian state to control their business activities in the future are very modest," she added.

According to a survey conducted by the FIU in the summer of 2020, providers of virtual currency services registered in Estonia have the most customers in the United States, followed by Venezuela, Russia, Vietnam, Indonesia, Brazil, India and Iran.

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