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The Ministry of Finance will start regulating the field of crowdfunding and crypto assets

19. January 2021 - 9:50

The Ministry of Finance published a draft regulation, with which are established requirements for service providers that offer investment opportunities, in crowdfunding projects or crypto assets.

"Technological innovation has brought with it new business models and services that are currently largely unregulated. It is important here to find a suitable balance that requirements do not overly restrict the entry of new services to the market, but at the same time, the interests of consumers and investors are protected. It is of foremost importance that investors receive sufficient and relevant information, when they wish to invest their money into crowdfunding or crypto assets", said Minister of Finance Martin Helme.

The investing through alternative investment environments, within the last decade has accelerated – for example into different crowdfunding projects and crypto assets, this on a global level, as well as in Estonia. Investment opportunities have diversified, resulting from the development of technology, which has simplified the inclusion of capital.

The activities of such companies are currently largely unregulated in Estonia, also lacking are efficient measures for the protection of investors. New technology may make the mediation of capital simpler, for investors and companies, but there are also different risks associated with it. Consumers and investors may receive too little information, due to the lack of rules and it is also easier to commit fraud, in an unregulated financial sector.

It is therefore that the draft regulation regulates new and innovative ways of including capital, with foremost the desire to ensure a greater protecting of the investor. The regulation covers a large part of the Estonian FinTech sector, with requirements that ensure among others, a more equal treatment of financial services companies, more uniform conditions of competition and the service of providing clients a better overview of the services offered, as well as establishes relevant protection mechanisms.

The draft is used to make the proposal that the supervision of all service providers, established in Estonia, connected with virtual currencies, be placed under the competency of the Financial Supervision Authority. The provider of virtual currency service, currently has to receive an activity licence from the Financial Intelligence Unit, but supervision of their business activities is done to a very limited extent. The Financial Supervision Authority, according to the draft, will also start performing supervision over the providers of crowdfunding. Requirements are also foreseen with the draft that concern giving investors sufficient information. The service provider for example, in the future, must provide investors sufficiently thorough information, not only already prior to the making of the investment, but also on an ongoing basis, for example when problems occur with the investment project.

The Ministry of Finance awaits feedback on the current draft, at the latest by the 5th of February of the year 2021.