The cryptocurrency market has been and remains one of the fastest growing area of finance around the world. The development of cryptocurrencies, various types of tokens invariably positions various govenments to seek to set a controling framework of this area of the financial market in order to make it more predictable, regulated, and also to prevent the risks associated with the volatility of cryptocurrencies and opportunities for money laundering and terrorist financing. Finland decided to follow the example of other countries and adopted a separate legislative act at the national level with the aim of regulating issues related to the circulation of crypto assets.
Legislative measuresThe active development of the regulation of virtual assets in the countries of the European Union began after the adoption of the joint proposal of the European Parliament and the European Commission “On Cryptoasset Markets” on September 24, 2020. However, Finland was concerned about the regulation of crypto markets a little earlier and adopted the Law “On Virtual Currency Providers” (hereinafter referred to as the Law), which came into force on May 1, 2019. The said Law governs the following:
- rules and procedures for issuing virtual currency,
- the procedure for providing virtual currency exchange services; as well as
- the procedure for providing custodial wallet services.
- was not issued by the central bank of any state or other government body;
- is not legal tender;
- is a means of payment ;
- may be transferred, stored or exchanged electronically.
Regulator and AuthorizationIn Finland, issues related to supervision and regulation of the financial sector are regulated by a separate body — the Financial Supervisory Authority, or FIN-FSA to be shorter. According to the Law and related regulations, in order to carry out the abovermentioned activities, individuals and legal entities must register with FIN-FSA. Registration is mandatory for - “virtual currency exchange services”, “custodian wallet providers,” and “issuers of virtual currencies.”.
At the moment, there are only 3 exceptions in Finnish law, in which a person who is engaged in activities related to crypto assets should not be registered. Entities who carry out the following services are exempted from registration:
- provision of services with virtual currency in a limited or closed network;
- provision of virtual currency services not on a permanent basis in connection with the implementation of other activities that require separate licensing, registration or authorization;
- carrying out activities with virtual assets that are issued by government agencies.
The full list of registered virtual asset service providers are open to public and can be accessed on the FIN-FSA’s website in the section 'Registers' under 'Lists of supervised entities'.
The main problem regarding the implementation of virtual currencies in Finland is that, according to the Law, registration in FIN-FSA can only be obtained by a person who has the right to do business in Finland, which forces such a person to go through additional bureaucratic procedures to carry out activities, as well as register a company or a branch in Finland. Also among the mandatory requirements in the Law there are provisions on the marketing of the services of a virtual currency provider. Thus, the registrant is obliged to provide clients with information that may concern them, while the scope of such information must be determined in each specific case and in relation to each of the clients. Providing false or other information that is misleading is prohibited, as well as other unfair or discriminatory treatment of the client.
For registration it is necessary to submit an application for registration to FIN-FSA by means of a written application for registration in Finnish or Swedish along with the required documents. It is also possible to submit an application with attachments in other languages, however, this requires prior approval from FIN-FSA.
Registration is required to ensure customers that virtual currency providers comply with their legal requirements regarding:
- reliability of the provider, which consists in its compliance with legal requirements;
- storage and protection of clients' money in accordance with applicable law;
- separating the funds of the provider and the funds of customers that he receives in connection with the activities carried out;
- compliance and continued compliance by the provider with marketing requirements;
- compliance by the provider with the legislation on combating money laundering and the countering terrorism finacing.
FindingsDrawing conclusions from the above information, it should be said that despite the adopted national legislation, one should also pay attention to the EU legislation regarding cryptocurrencies, taking into account the specifics of the EU legal system. The main problem of providing services with virtual currencies in Finland is the problem with the cross-border provision of such services, which follows from the requirement to have a company or branch in Finland. So now it is necessary to closely monitor the evolving legal framework in the EU, especially the process of adopting the regulation “On Crypto Asset Markets”, which will allow you to more carefully predict business development and risk assessment if you want to work in Finland.
The content of this article is intended to provide a general guide to the subject matter, not to be considered as a legal consultation.Photo credits