Beginning in February, Estonia is set to introduce sweeping changes to its definition of Virtual Asset Service Providers, or VASPs, to include several cryptocurrency-related services — a move that could impact Bitcoin (BTC) ownership in the country — according to European compliance specialist Sumsub.

On Sept. 21, the Estonian Ministry of Finance published a draft bill to update the Money Laundering and Terrorist Financing Prevention Act (the AML Act) as part of the government’s effort to prevent money laundering and terrorist financing.

As Sumsub reported, the legislation is now in the interagency review process, with implementation set for February 2022. Regulated crypto companies have until March 18, 2022 to bring their operations and paperwork into compliance. 

According to New DeFi CEO Mikko Ohtamaa, the updated law effectively bans non-custodial software wallets, as well as decentralized finance products, in the country. That’s because the bill’s provisions target VASPs, which include crypto exchanges and wallets, in Estonia. When the bill is ready, VASP will be extended to cover decentralized platforms, initial coin offerings and other services. Violation of the provisions may result in a penalty of up to $452,000, or 400,000 euros. 

According to Ohtamaa’s interpretation, the new law has the following effect: “You are only allowed to hold your Bitcoin in a custodial Virtual Asset Service Provider (VASP). VASP can freeze your account. So it is not effectively your Bitcoin anymore.”

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