ESTONIA Law and Practice Contributed by: Yuliya Barabash, Ivan Nevzorov, Daria Lysenko and Nikita Prokopenko, SBSB FinTech Lawyers
10.8 Cryptocurrency Derivatives Cryptocurrency derivatives in Estonia are generally considered financial instruments if their nature and structure meet the definition under EU legislation – ie, regulations applicable to financial instruments may apply, and companies must obtain an investment firm licence and comply with risk management, investor protection, trading transparency and best execution requirements. As specified in the MiCA regulation, its scope does not include assets that are already finan - cial instruments. 10.9 Decentralised Finance (DeFi) Currently, Estonia does not have separate DeFi regula - tions, and business activities are assessed according to the EU principle of “same activity, same regulation”. This means that, regardless of the type of business, if it conducts regulated activities (trades in crypto- assets, provides custody services, executes orders), such activities will fall under the scope of MiCA and require a CASP in Estonia; or, in the case of offering tokenised securities, financial regulation, in particular MiFID II, will apply. In other words, providers cannot avoid regulation by referring solely to the absence of a formal intermedi - ary, because as long as there is a person or structure that controls or administers the service, Finantsins- pektsioon will consider it a provider of services subject to regulation. 10.10 Regulation of Funds Funds in Estonia that invest in blockchain assets are subject to regulation depending on the nature of the assets themselves and their legal nature. For invest - ment funds that invest in securities, European regula - tions on licensing, risk management, disclosure and investor protection will apply. For crypto-assets that are not financial instruments, MiCA requirements must also be taken into account, especially for the storage of crypto-assets or the use of licensed CASP provid - ers’ services. 10.11 Virtual Currencies The concept of virtual currencies and the broader concept of blockchain assets are treated differently in Estonia, reflecting the development of the EU regu - latory framework. Prior to the introduction of MiCA in
In the provision of staking services the crypto-assets, or the private keys giving access to them, are held by the staking service provider in custody. Thus, the provision of staking services is ancillary to custody services which are fully covered under MiCA. The provision of staking services therefore requires that the crypto-asset staking service provider is author - ised under MiCA to provide custody and administra - tion of crypto-assets on behalf of clients, as set out in Article 75 of MiCA. In offering and providing the staking services, the service provider must meet at all times the requirements set out in MiCA incumbent on entities authorised for the provision of custody and administration of six crypto-assets on behalf of clients (in particular Articles 59, 62, 66 and 67 to 75 of MiCA including but not limited to concluding agreements that specify duties and responsibilities, segregating customer assets from the service provider’s estate, minimising the risk of loss, liability for loss of crypto- assets, etc). In particular, it follows from these obligations that, where staking services are provided in combination with the provision of custody, crypto-asset service providers (CASPs) should ensure that the assets held on behalf of clients can be returned to the clients in accordance with the custody agreement. CASPs should also remain liable to their clients for any loss of crypto-assets attributable to them, pursuant to Arti - cle 75 (8) of MiCA. Losses of crypto-assets stemming from the provision of staking services provided to the client, and from the underlying staking activity itself, should be deemed as attributable to the CASP. Where staking services are provided in combination with any other crypto-asset services governed by MiCA, CASPs should obtain an explicit consent from the clients to stake their crypto-assets, as it may have an impact on their clients’ ability to access them. 10.7 Crypto-Related Lending Estonia, in accordance with the MiCA framework, does not specify separate regulations for the provi - sion of lending services for crypto-assets. Similarly, if the services involve the storage or management of clients’ crypto-assets, the activity may be subject to regulation and require a CASP licence from the com - petent regulator.
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