Striga, the newest challenger in the emerging crypto banking-as-a-service sector, has chosen Estonia as the home of its headquarters. The Baltic country has devoted itself to constructing a reputation for being highly digital and friendly to startups, notably, cryptocurrency companies.
Though regulations have been shifting lately, Estonia just celebrated Glia as its 10th unicorn. Striga, after a fruitful 2021, is getting ready to leverage the incoming prestige of the newly implemented VASP (crypto) license, with the goal of building a world class crypto banking ecosystem.
This change in the regulatory framework will cause a shift in the Baltic financial ecosystem, and create both a challenge and an opportunity for Lithuania to rise to the occasion. The Baltics may be about to enter a new stage as a FinTech stronghold.
Estonia’s cutting-edge regulatory framework:
Estonia’s journey towards being labeled the “incoming Silicon Valley of Europe” arguably started with Skype’s creation in 2003. By 2005 it had become a unicorn and provided the spark, but only in recent years have things ramped up. Since 2020, 6 unicorns have emerged, for a total of 10 overall.
The nascent crypto industry took note: a startup-friendly European country, with a digital business ecosystem, and receptive regulation towards digital assets? Estonia looked like a much-awaited blessing. As a result, over the last lustrum, hundreds of crypto companies set up shop there.
As expected, the Financial Intelligence Unit eventually saw the underlying risk of being too open to virtual asset companies. Thus, they passed a set of new and rigorous regulations in March 2022, so as to cull the vast crypto ecosystem, purge out non-compliant companies, and empower fair players to rise to the top.
A Promising Baltic Opportunity:
While this is a change in Estonia, it will have a direct impact on the entire Baltic region, especially Lithuania. In fact, it will serve as a two-fold bridge between both states, first for runaway companies, and then for regulatory standards.
Currently, there are over 400 crypto-related entities registered in Estonia. Most are operating under light regulations, and will be faced with compliance challenges unlike any they’ve encountered before. Some have already started moving to Lithuania, and they will keep doing so in increasing numbers.
This exodus of non-compliant companies will put Lithuania in a potentially compromising position. Lithuania’s chairman of the Seimas Budget and Finance Committee, Mykolas Majauskas, has expressed plans to tighten the regulation of cryptocurrencies. With Lithuania following in Estonia’s footsteps, it will reinforce its already prominent position as a Hub for EMIs (Electronic Money Institutions).
Companies looking to survive will find that changing countries is not a solution, but a palliative. In the long run, they can either go through the licensing process, for which Striga hopes to become a referent, or partner with a licensed company.
As a boon, those who get proactive about complying can develop a mutually beneficial relationship with regulators. In the U.S., Coinbase took a compliance-first approach and ended cooperating with the FCC to help them understand the new challenges that come with crypto. That same type of relationship that Coinbase built with the US regulators could be built by up and coming crypto companies in Estonia.