Finance minister: US, Estonia can collaborate on crypto currency monitoring

Finance minister Keit Pentus-Rosimannus (Reform).
Finance minister Keit Pentus-Rosimannus (Reform). Source: ERR

Estonia is ready to share its experiences in regulating virtual currency transactions with its key ally the United States, finance minister Keit Pentus-Rosimannus (Reform) told United States Treasury Secretary Janet Yellen during a video call on Friday.

The finance minister said Friday that: "The U.S. is one of Estonia's most important partners in the field of security, and also in financial matters. We highly value cooperation with the U.S. in the prevention of money laundering, including their advice on risk analysis systems."

Pentus-Rosimannus made her remarks after the virtual meeting with U.S. Treasury Secretary Janet Yellen, which focused on Estonia's proposal for a new regulation of crypto currencies, an area where Estonia is ready to share its experience.

The Organization for Economic Cooperation and Development (OECD) global tax agreement, which last October Estonia agreed to in principle, albeit with some reservations, was also on the table.

A bill soon to be put before the Riigikogu will, if it passes, increase the transparency of virtual currency transactions, including those using crypto currencies like Bitcoin, as well as non-fungible tokens (NFTs), reducing the anonymity of crypto asset transactions, the finance ministry says, adding this will enable more effective monitoring of a sector which, the minister says, is rapidly growing.

Pentus-Rosimannus said: "In the area of ​​virtual currencies, most countries are currently looking for solutions that can allow the fast-growing sector to develop in a transparent and investor-friendly manner." 

"Estonia has mapped and recognized the risks of this sector at an early stage, and we are happy to see wider international cooperation in bringing together the best practices for managing these," she went on, according to a ministry press release.

Similar rules would under the planned reforms apply to banks and financial institutions, while Estonia could share its knowledge here, the minister said. "I suggested to the U.S. Treasury Secretary that Estonia can share its experience to identify best practices. We also discussed opportunities for cooperation in implementing FATF standards and regulating cryptographic assets."

Pentus-Rosimannus and Yellen also discussed the OECD global tax agreement, while Pentus-Rosimannus said that discussions on this should accompany and be harmonized with the implementation of digital tax plans.

The EU's draft tax directive is mostly in line with the OECD agreement, and Estonia supports it, with some exceptions, the finance minister said, highlighting the need to protect the interests of the Estonian business environment and maintain a corporate income tax system which supports innovation and investment.

Pentus-Rosimannus and Yellen also discussed the worldwide soaring energy prices, the situation on the Russia-Ukraine border and the Covid pandemic, at their virtual meeting.

Last October, Yellen stressed to Pentus-Rosimannus the importance of reaching a deal aimed at reshaping the global tax system in a way that ensures that corporations pay their fair share.

The finance minister said last month that the state is doing all it can to maintain its current income tax system within the framework of the EU tax debate, while this would also entail a wait-and-see attitude to the outcome of the OECD-led global tax reform.

Estonia agreed in principle to join the OECD reform in October.

Estonia's tax system as it currently stands provides for zero corporate income tax on retained and reinvested profits, meaning resident companies and the permanent establishments of foreign entities (including branches) are subject to 0 percent income tax for all reinvested and retained profits, and a 20 percent income tax only for all distributed profits (both actual and deemed).

This makes Estonia, it is argued, attractive to business and foreign investment, not least via the e-Residency scheme, also growing in popularity.

At the same time, a major money-laundering scandal which erupted in 2018-2019 and led to the closure of the Tallinn branch of Danish bank Danske, drawing Swedbank into the affray also, harmed the country's reputation internationally, with many of the money laundering hearings actually taking place in the U.S.

The issue of crypto currency, which some companies in Estonia have exploited successfully, even reaching the Pandora Papers in the process, has also been hotly debated, with anti-money-laundering authorities calling for the crypto currency licensing system to be rebuilt anew.


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Editor: Andrew Whyte

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