On 4 October 2018 the Government of Finland released the Government Proposal 167/2018 (hereinafter “HE 167/2018”) that proposes a Cryptocurrency Providers Act of Finland (hereinafter “CPA”) to regulate cryptocurrency providers. This article briefly assesses the current developments and contents of the CPA.
Legality of Cryptocurrency in Finland
Currently it is legal in Finland to buy, sell and use cryptocurrency, as there are no laws forbidding such activities. Hence, private persons practically need only worry about taxation and not using cryptocurrency for illegal ends.
It is also currently legal in Finland to provide cryptocurrency exchange services to others, as there are no laws in Finland that would prohibit the provision of cryptocurrency exchange services. In addition, there are no special legal requirements for the provision of cryptocurrency exchange services in Finland, and thus, a cryptocurrency provider is not legally required to have a license or any kind of other permit for the provision of cryptocurrency exchange services. Furthermore, there is no official centralized supervision of cryptocurrency providers.
What is the Cryptocurrency Providers Act of Finland Supposed to Regulate?
Section 1 of the CPA states that the CPA shall apply to the activities carried out by cryptocurrency providers. According to Section 2 Subsection 1 Paragraph 2 of the CPA, cryptocurrency providers are the issuers of cryptocurrency, the ones providing cryptocurrency exchange services and market places for such activity and the ones providing wallet services.
According to Section 4 of the CPA, a cryptocurrency provider shall need to be registered with the Financial Supervisory Authority of Finland (hereinafter “FSA”). According to the CPA, registration requires that the applicant: (i) has a right to conduct business in Finland, is not bankrupt and is trustworthy (Section 6); (ii) retains documents relating to its cryptocurrency business in compliance with the requirements of the CPA (Section 10); (iii) adequately protects customer funds (Section 11); (iv) adequately complies with marketing requirements (Section 12); and (v) adequately complies with KYC requirements (Section 13).
According to Section 3 of the CPA, the FSA acts as the supervisory authority of cryptocurrency providers and according to Section 5 and 9 of the same Act, the FSA has an obligation to maintain a public register of cryptocurrency providers. Furthermore, the CPA provides the FSA with several tools to ensure that the cryptocurrency providers comply with their obligations (Sections 15 – 17).
The upcoming legalization of cryptocurrency shall not only mean increased obligations for cryptocurrency and the use of it, but also the creation of a specific legal status for cryptocurrency, as cryptocurrency shall officially become a legal instrument under Finnish law. This should increase the transparency, legal certainty and overall trust in cryptocurrency and in the cryptocurrency market, which in turn should have a direct positive impact on the usability of cryptocurrency.
The CPA is expected to enter into force during the year 2019. If you have any questions in preparing for the Act and its requirements, we are happy to help.