Estonian authorities are clamping down on foreign companies and individuals abusing its e-residency program to commit crypto frauds.

In Summer 2020, Estonian authorities revoked the licenses of over 500 crypto companies which had taken advantage of the country’s crypto-friendly stance and e-residency scheme, but still failed to establish any legitimate operations in the small Baltic nation.

Estonia took the drastic action, after it became clear that it was the centre of a huge $220 billion money laundering network, which involved the local division of Denmark’s biggest lender, Danske Bank A/S. 

However, a recent police report suggests Estonia’s e-residency scheme is still being used by foreign individuals to perpetuate a host of cryptocurrency frauds and scams abroad. 

According to Bloomberg, the Financial Intelligence Unit of the Estonian police, says that companies registered abroad but run by Estonian e-residents have been involved in large-scale exit scams, and “suspicious initial coin offerings and the misappropriation of large sums within them.”

Apparently, since the program was launched in 2014, Estonia has issued around 70K digital IDs to e-residents from a total of 174 countries – with many going to Finnish, Russian, and Ukrainian citizens. 

But, despite being successful in many ways, the scandals have severely tarnished Estonia’s reputation – especially its cryptocurrency sector. Now, the government says its e-residency team is working with police to clean-up the mess and root out the bad actors, and it is looking at making changes to the system so it is less open to abuse. 

The police are said to be paying particular attention to companies that offer cryptocurrency exchange and custody services for foreign clients. Illustrating the scale of Estonia’s crypto fraud problems, today there are only 353 companies with a cryptocurrency license in the country, compared to 1,234 at the end of 2019. 

AYO.NEWS says:

Estonia serves as a cautionary tale for everyone. Though its e-residency scheme has been extremely successful in many ways, particularly in delivering public services to local residents and businesses, the authorities were obviously too trusting and/or too eager to establish the country as a crypto hub. 

However, it doesn’t necessarily mean that taking your time when introducing regulations makes a country any less prone to corruption – just ask Malta. The key has to be a balanced, realistic outlook, and this can only happen when policy makers are educated and fully understand the issues. 

Staying with Estonia, just last week, B2B casino games supplier Ganapati’s Estonia arm was declared bankrupt, with the company blaming the COVID-19 induced economic crisis. 

‘AYO.NEWS says’ features the opinion of the author and does not necessarily reflect the views of Pentagon Digital Limited or its affiliates or associates. 

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