Over 1500 Suspected Crypto Companies Shut Down Among Regulation Breach and Ties to Russia.
Photo: Agency «Moscow» / snob.ru
Estonia has achieved a significant milestone in the cryptocurrency world by successfully closing down over 1,500 crypto companies suspected of regulatory breaches and ties to Russia. This achievement is the result of a collaborative effort with VSquare and esteemed partners such as Delfi (Estonia), Siena (Lithuania), Fronstory.pl (Poland), Paper Trail Media, Der Spiegel, ZDF (Germany), and Der Standard (Austria), represent a significant step forward in cryptocurrency regulation.
Estonia, known for its tech-savvy approach to governance, witnessed its cryptocurrency sector grow rapidly over the last five years, with nearly 55% of all virtual currency service providers worldwide based within its borders by mid-2021. The country's accommodating cryptocurrency licensing system allowed companies with non-resident owners and clients to operate under the banner of EU-licensed financial services.
The numbers by country indicate the owners and board members from that country who are associated with crypto companies established in Estonia. Source: https://vsquare.org
The investigative efforts of VSquare and its partners showcased the activities of approximately 300 crypto companies, unveiling cases of substantial fraud, money laundering, sanctions evasion, and support for criminal enterprises and paramilitary organizations.
Estonia's cryptocurrency licensing system, launched in 2017, initially promised innovation but faced challenges along the way. Nevertheless, Estonia's commitment to rectify these regulatory issues has been commendable. The phrase "licensed in the EU" unintentionally attracted fraudulent actors, leading to the entry of illicit funds into the European Union.
One particularly concerning finding of the investigation was the ease with which cryptocurrencies facilitated donations to Russian paramilitary organizations and funds related to criminal activities such as drug trafficking. For instance, the “Rusich” (rus. Русич) private military group, known for its involvement in the foundation of “Wagner” (rus. ЧВК Вагнер) and its participation in the war in Ukraine, received hundreds of thousands of euros in cryptocurrency donations. Criminal exchanges like Garantex Europe OÜ played a crucial role in these transactions, despite sanctions imposed by Western countries.
Another alarming revelation involved Coinsbit, a cryptocurrency exchange enabling the conversion of Russian rubles into Bitcoin. Although the exchange was related to an Estonian company, ITEcosystem OÜ, which had lost its crypto license in 2020, it continued to operate. The ownership of Coinsbit remained shrouded in mystery, even as billions of dollars were transacted through the platform.
This success story highlights Estonia's reputation as a tech-savvy nation and its resilience in navigating the complex cryptocurrency landscape. It solidifies its status as a pioneer in the digital age. In an additional development, Lithuania has initiated investigations into the case as well. Lithuania, with over 800 crypto companies in its jurisdiction, has official institutions taking a closer look into the matter. This collaborative effort underscores the commitment of the Baltic states to ensure the integrity of the cryptocurrency market.
The article was prepared for publication by volunteers from the Res Publica - The Center for Civil Resistance.