Estonia opposes cryptocurrencies.

And she was the first in the world to adopt them!

After experiencing the initial wave of the digital currency revolution half a decade ago, Estonia is imposing sanctions on the emerging industry in a didactic story about would-be cryptocurrency nodes.

With a significant review of its anti-money laundering policies scheduled for early next year by the Council of Europe, the Baltic government is weighing the need for stricter oversight. The country has become a famous European center for digital currency trading and all the accompanying infrastructure.

"We will tighten our supervision; we will tighten our approach to market entry," Matis Maeker, director of the Financial Intelligence Unit (FIU) in Estonia, said in an interview. "We were the first country to regulate them; we were a gateway to be licensed because no one was licensing them."

The FIU is an independent body under the Ministry of Finance that can grant and revoke cryptocurrency licenses as part of its primary mission to combat money laundering.

This decision is urgent for the 1.3 million euro area and NATO Member States. The country is trying to overcome an extensive money laundering scandal in 2018, in which the Estonian branch of Danske Bank handled suspicious transactions amounting to 200 billion euros.

Authorities have since revoked about 2,000 licenses for cryptocurrency exchanges and wallets, and now the Estonian government is considering new legislation to tighten surveillance in all areas. This government decision includes annual reports, higher levels of capital, and due diligence thresholds for the trading volume.

Governments around the world need help with how to regulate digital assets. For example, while China has banned cryptocurrency trading, bitcoins have been legalized in El Salvador.

In Estonia, the attitude became more pessimistic in April when the country's security services investigated a company called Shitcoins. Club. The company - whose ATMs convert customers' physical banknotes into anonymous digital currencies - has been described as a security risk. As a result, the FIU revoked its license, held by a company called Virtual Planet.

Cryptocurrency companies may be registered in Estonia, but their customer base is international. The industry's top clients are in the United States, Venezuela, Russia, Vietnam, Indonesia, Brazil, and India, the FIU said earlier this year.

The companies handle transactions that account for more than 40% of cross-border payments in Estonia's banking sector - or more than 20 billion euros, Maeker told the Eesti Ekspress newspaper.

In a 2020 study, only 10% of cryptocurrency service providers licensed in Estonia had accounts with local banks. About 40% had banking transactions with Lithuanian institutions, and 20% used lenders from the United Kingdom.

According to FIU chief Maeker, if Estonian officials had anticipated the risks associated with cryptocurrency companies in 2017, they would have prevented such explosive growth.

"Surely the decision would have been different," he told Bloomberg. "We learn, but after all, everyone learns."

This article is for informational purposes only and does not replace specialized consulting services with professional experts.