Estonia and Crypto A Chequered History OR Differences between Lithuania and Estonia
Lithuanians and Estonia
Modified Date:- Published Date:-Categories: Cryptocurrency
Estonia & Crypto– A Chequered History OR Differences between Lithuania and Estonia
Lithuaniaisn't the only country that has made regulatory changes recently. Fellow Balticcountry Estonia has also adopted a 'stricter' approach to crypto regulation- with many Lithuanians fearing that what happened in Estonia may also occur intheir home country.
For thoseunaware, Estonia was one of the first countries to really open its doors tocrypto-focused companies. This was achieved through ‘liberal’ regulatorypolicies, which made it quick and easy for companies to get set up as aVirtual Asset Service Provider (VASP).
Theregulation was so relaxed that, by mid-2021, Estonia was home to over 50% ofthe world's VASPs – a remarkable feat for a country with a population of justover 1.3 million. However, as the crypto market expanded, it became evidentthat the 'quality' of the companies in operation was becoming an issue, leadingregulators to take action.
Differencesbetween Lithuania and Estonia
Let’stake a look at a few of the most notable differences between the nations:
Numberof Companies in Operation
As mentionedin the previous section, Estonia used to be a hotbed for crypto firms,yet the increased regulatory requirements have forced many to shut up shop.Moreover, prospective business owners are likely to look elsewhere whensearching for a country to base their firm – which is why over 90% of Estonia’scrypto licenses are no longer valid.
To put thisinto perspective, only eight crypto companies were registered in Lithuaniaduring the whole of 2020. This figure increased to 188 in 2021, whilst 40 morewere added in the early stages of 2022. According to the Lithuanian FinanceMinistry, more than 250 crypto companies are now based in the country.
FavourableEconomic Conditions
Anotherreason the situation in Lithuania differs from that in Estonia is thedifferent economies each country has. Lithuania has traditionally been seen asa country with a strong and stable economy. According to Georank, Lithuania hasthe 83rd largest economy globally, with a GDP of roughly $53.4bn.
Finally,inflation is significantly higher in Estonia than in Lithuania, regardless ofwhether it's measured using consumer prices or a GDP deflator. Thesecharacteristics combine to paint a rosy picture of Lithuania's economy comparedto Estonia's. Naturally, this makes Lithuania a better option for businessowners looking for somewhere to base their crypto firm.
RegulatoryResources
Finally,Lithuania and Estonia differ concerning regulatory capabilities. Althoughupdated regulation coming into play does increase the requirements for new andestablished firms, these rules must still be enforced properly.
For example,the FCIS primarily develops public communication strategies to engage people inthe battle against financial crime and helps identify and prevent criminal financialacts. Yet the FCIS doesn't have the capacity to actually charge the wrongdoers– it simply conducts investigations and hands the information over to thecourts.
After Lithuania became the first country in the Baltics to regulate cryptocurrency this April, Estonia followed suit with a similar set of rules on Friday. While many Lithuanians welcomed the news, other locals were concerned about what might happen next. Meanwhile, both countries have been slowly embracing cryptographic technologies for years and their governments now want to take it one step further by regulating crypto-related businesses.