Anti-money laundering chief: Cryptocurrency licenses should be revoked

Cryptocurrency operating licenses in Estonia should be revoked, and the system rebuilt from scratch, chief of the money laundering bureau (RAB) Matis Mäeker told investigative weekly Eesti Ekspress. Failure to do so may result in another Danske-style financial scandal.

Mäeker, who was appointed to the role in May this year, said the Estonian business of cryptocurrency operators of all hues amounted to tens of billions of euros per year, money which generally did not see its way back into Estonia's economy, infrastructure or society, while the risks associated with the sector were "very, very high", he told Eesti Ekspress in an interview which appeared on its website (link in Estonian).

Under Mäeker's proposals, the share capital of firms engaged in cryptocurrency activities would be raised to €350,000, and the operator should have this money in hand as cash or as low-risk, quick-selling securities, Eesti Ekspress reported. The current equity requirement for start-ups in the sector is €12,000, the paper said.

Cryptocurrency risk could be equated to the issues which ultimately led to the closure of the Tallinn branch of Danske Bank, Mäeker said, adding that if the state does not impose controls on these risks very quickly, consequences could follow which would be undesirable for the Estonian state.

Mäeker also expressed scepticism about the benefits for Estonia of the presence of many cryptocurrency operators, given their profits – sometimes astronomical sums as in the case of, for instance, cryptocurrency gambling outfits – are rarely ploughed back into Estonian infrastructure or society.

He said: "Their only goal is to get an Estonian license and use it to turn over very large sums, while Estonia gets nothing out of it."

Often, as in the case of gambling firms, jobs are not created primarily for Estonian citizens, nor are the services provided aimed at Estonian customers, nor is anything significant paid into the country's tax coffers.

In June, shortly after taking up the role, Mäeker, had said that cryptocurrency authorizations would be the subject of future scrutiny, while a legislative bill tightening up demands made on them would likely be drafted.

Mäeker added the efforts were not a blanket attempt at persecution of those working in the cryptocurrency sector, many of whom, he said, put their heart and soul into their work, but rather that the RAB was responding to a visible surge in virtual currency licenses which were often white-labeled in by third party companies or legal services providers and involving investors with no connection with or interest in the country.

Outright criminal activity was also a concern, Eesti Ekspress reported, as was the potential financing of terrorist activity or relating to totalitarian regimes worldwide.

Mäeker put the turnover of cryptocurrency operators at over €20 billion-per-year in cross-border payments within the banking sector, in other words conversion into euros.

While a register of actual beneficiaries of crypto activity was introduced some years ago, it has been toothless so far, Mäeker added.

Other recommendations the RAB has made include requiring companies operating in the sector have more secure IT systems and that hard cash be used in investment rather than re-financing property, for instance, which, Eesti Ekspress reported, has led to instances where people have lost their properties.

The original Eesti Ekspress article (in Estonian) is here.

Read the article at ERR.