On Sunday, Estonia Ministry of Finance unveiled a new project involving virtual asset service providers. As stated in the announcement, the new laws for VASP will apply to cryptocurrency wallet providers but will not prevent crypto clients from holding and trading digital assets.
The announcement came after it was revealed that the proposed regulation could damage decentralized finance (DeFi) and affect wallets without proper collateral.
Digital wallets, which lack proper government-mandated protection, ensure their owners have complete access to their private keys. The latest restrictions basically prohibit wallets with “software that does not provide custodial services” and decentralized financial products. In practice, this means that they will eliminate the wallets market for digital assets typical of this industry.
The news mentioned above sparked quite a buzz throughout the entire cryptocurrency ecosystem. Many digital asset companies recently established in this country. Following the publication of a particular information page, the Ministry of Finance posted the most commonly asked questions about the entire subject on its website.
According to the institution, the new draft law is only Estonia’s response to the FATF’s instructions on VASP regulations.
This means that the regulations do not ban clients from holding and trading virtual assets, and they do not demand clients to share their private wallet keys in any way.
According to the published website, Estonia’s financial analytics unit (FIU), which has been focusing on VASP licensing since 2017, is overly flexible with regard to licensing standards for bitcoin service providers.
The FIU had canceled permits for over 1,000 cryptocurrency businesses in 2020, and they contended that they had no interests in Estonia. According to the new rule, VASP firms seeking a license from Estonia must operate in the country or have a “visible relation” with it.
VASP’s capital requirements are also increased under the new law. Such businesses will be required to have a minimum share capital of 125,000 euros (about 141,000 USD) or 350,000 euros, depending on the type of services they provide. The current minimum is 12,000 euros, which is roughly equal to 13,500 dollars.