Estonia, once hailed as a beacon for digital innovation, has recently come under scrutiny for its lax regulations in the cryptocurrency sector. The country’s rapid issuance of licenses to crypto companies has inadvertently paved the way for money laundering and other illicit activities. The Austrian newspaper Standard published an interesting story about how Estiónian crypto exchanges laundered money for Russian terror groups using Estonian trustees.
Estonia’s allure for crypto businesses began in 2017 when it started offering swift licenses for cryptocurrency exchanges and payment processors. This initiative attracted over 2,000 global providers. However, among these were entities with dubious intentions. One such company was Izibits OÜ, linked to the chat-based crypto exchange Chatex. The U.S. Treasury Department flagged over half of Chatex‘s transactions as tied to high-risk activities, including darknet markets.
Estonia’s financial regulator took action in 2020, revoking two-thirds of all crypto licenses. This decision followed the revelation that over €200 billion had been laundered through the Estonian branch of Danske Bank. Estonia, keen on preserving its reputation as a digital pioneer, had to distance itself from the growing perception of being a haven for illicit financial activities.
Garantex, a crypto exchange operating out of Moscow and Saint Petersburg, was among the companies that lost their Estonian license. Despite this setback, Garantex continues to function. The U.S. Treasury Department has linked over $100 billion of Garantex‘s transactions to illegal activities. Notably, $6 million was connected to the Russian hacking group, Conti, known for its ransomware attacks.
Read our Garantex reports here.
Furthermore, Garantex was instrumental in funneling funds to Russitsch, a Russian neo-Nazi mercenary group active in the ongoing conflict in Ukraine. This group, notorious for its brutal tactics, has been soliciting donations via cryptocurrencies.
The ease with which such groups can exploit crypto exchanges underscores the urgent need for robust regulations. While digital currencies offer numerous benefits, their misuse can have dire consequences.
