Estonia has reassured crypto investors the government will not ban digital assets as it moves to tighten money laundering rules.
The Baltic nation is considering new anti money laundering policies which will increase due diligence standards, audits and require crypto firms to hold higher levels of capital.
The draft legislation sparked concerns amongst crypto investors that the government is seeking to crack down on decentralized finance (DeFi) and non-custodial wallets which give users exclusive ownership of their digital assets and private keys.
In a clarifying statement, Estonia’s Finance Ministry said that the new rules will apply to Virtual Asset Service Providers (VASPs), which handle crypto on behalf of clients, and will not impact on people’s ability to trade or buy digital assets.
“The legislation does not contain any measures to ban customers from owning and trading virtual assets and does not in any way require customers to share their private keys to wallets,” the statement read.
“The regulation does not affect individuals who own virtual currency through a private wallet not provided by a VASP,” the statement continued, explaining that the proposed rules will stop VASPs from opening wallets anonymously.
According to the government’s website Estonia’s bill is a reaction to guidance from the Financial Action Task Force on regulating crypto currencies and virtual asset service providers.
Estonia was one of the first jurisdictions to provide licenses to virtual asset service providers in 2017.
However, the government was forced to tighten its approach to crypto licensing following concerns that Estonia was becoming a hot bed for money laundering. Some 2,000 licences have been revoked and just 400 licensed firms remain.
Under the forthcoming guidance only firms based in Estonia which are subject to regulatory scrutiny will be able to apply for the licenses.