The Estonia Ministry of Finance said on Sunday that new draft legislation for virtual asset service providers (VASPs) will not prohibit customers from owning or trading cryptocurrency, but the proposed requirements for VASPs, which include high capital requirements, could apply to decentralized wallet creators.
Following reports that the planned measure will effectively ban decentralized finance (DeFi) and non-custodial wallets, the White House issued a statement on Sunday. Users have complete custody of their crypto and private keys with a non-custodial wallet.
The new draft legislation for virtual asset service providers (VASPs) does not prohibit consumers from owning or trading cryptocurrency, but the proposed conditions for VASPs, which include high capital requirements, could apply to decentralized wallet makers.
The measure, according to Estonian Finance Minister Keit Pentus-Rosimannus, is intended to tighten anti-money laundering (AML) standards for VASPs, reducing the formation of anonymous accounts in particular. If passed, Estonian VASPs will be compelled to identify their consumers while issuing accounts or wallets under the new regulation.
According to the statement, the legislation does not include any provisions prohibiting users from owning and exchanging virtual assets, nor does it force clients to reveal their private keys with wallets. Estonia’s new bill responds to the Financial Action Task Force’s (FATF) guidelines on VASP regulation.
The FATF advice specifies that DeFi apps are not VASPs in and of themselves, but that creators, owners, operators, or other persons who maintain control or substantial influence in DeFi arrangements can be considered VASPs under the FATF definition.
According to the Ministry’s announcement, developers, owners, or other persons who profit monetarily from such programs could likewise be deemed compelled entities as VASPs.
The Ministry reaffirmed that no services will be prohibited, and that businesses that want to provide such services in Estonia must merely follow the AML rules. The bill now needs to pass Parliament before it can take effect in the first half of 2022.