As is the case with the entire EU’s blockchain market, the most significant regulatory developments for Finland in the past 12 months has been the adoption of the Markets in Crypto Assets Regulation (MiCA), along with the revised Transfer of Funds Regulation (TFR). In December 2023, the Finnish government introduced a preliminary legislation draft for the adoption of MiCA and the TFR, the Crypto-Asset Service Provider (CASP) and Crypto-Asset Market Act of Finland, with a proposal to forego the maximum two-year transitional period for virtual asset service providers (VASPs) registered under the currently applicable national VASP Act of Finland based on the EU’s 5th Anti-Money Laundering Directive (the “5AMLD”).

However, following the public feedback in April 2024, the final version of the proposed CASP and Crypto-Asset Market Act of Finland was introduced, including the transitional period for VASPs. Hence, the currently registered VASPs under the VASP Act of Finland can continue operating with their existing VASP registration until 25 June 2025 or until they are granted a CASP licence – whichever comes first – if they apply for a CASP licence before 30 October 2024.

Looking ahead, entities in the Finnish blockchain market must prepare for a landscape underpinned by MiCA, which imposes more stringent requirements ‒ especially in terms of prudential safeguards and permitted crypto-assets. This preparation will be crucial as companies transition from existing national registrations to broader EU regulatory frameworks.

In the context of the FTX bankruptcy and its implications for Finland, the repercussions have been significant for those involved. Notably, Tesseract Group ‒ an internationally operating crypto-asset lender, the operations of which were affected severely by the FTX bankruptcy ‒ suffered losses that in turn resulted in the loss of funds for many investors. As a result, the lender underwent a police preliminary investigation after complaints from several investors. The Finnish police concluded after the preliminary investigation that the market’s unpredictability and the significant devaluation of crypto-assets were unforeseen and not a result of criminal activity by Tesseract Group. The aftermath of the situation is ongoing, as several investors are still claiming to have their investments returned.

In Finland, there is a strong and established field of individuals and companies utilising blockchain technology. Examples include coder Martti Malmi, who was one of the first individuals involved in the development of Bitcoin and had direct email correspondence with Satoshi Nakamoto, and it is widely known that the founder of the decentralised finance (DeFi) service Aave, Stani Kulechov, is also Finnish. Among the individual companies traditionally working in the field of blockchain technology, Coinmotion deserves a mention, as it has been offering crypto-asset exchange services since 2012. It also operates and maintains a nationwide network of physical automated teller machines (ATMs) where official currency can be exchanged for crypto-assets.

As regards the most recent use cases of blockchain technology in Finland, it is worth mentioning that Nordic Law has been directly involved in pioneering the registration of one of the first crypto-asset-based alternative investment fund managers (AIFMs) in Finland. This groundbreaking achievement has led to the emergence of at least two such operators in the Finnish market, further indicating the rapid growth and adaptation of the blockchain sector in Finland.

One of the most notable developments in the use of blockchain technology within Finland ‒ and, arguably, across the EU ‒ was the launch of the Electronic Money Directive 2 (the “EMD2”)-compliant euro-based stablecoin, EUROe. In January 2022, the Finnish Financial Supervisory Authority (FIN-FSA) awarded an electronic money institution (EMI) licence to Membrane Finance Oy, the company responsible for issuing EUROe. This stablecoin is particularly innovative and was designed with the forthcoming MiCA in mind, making it a MiCA-compliant electronic money token (EMT). This compliance places EUROe at the cutting edge of regulatory adherence in the blockchain sector. Throughout the licensing process, Membrane Finance Oy was fully supported by Nordic Law, from the initial application to the final approval (public reference).

Equilibrium Group is also making significant advancements on multiple fronts, establishing itself as a leading provider of blockchain expertise globally. Among its projects are:

• Gevolut, a Layer 1 blockchain;
• Pathfinder, a full node for StarkNet;
• SnarkOS, which focuses on peer-to-peer (P2P) networking; and
• OpEVM, which enhances Ethereum virtual machine capabilities.

In addition, its subsidiary Eiger has partnered with Fireblocks to become an “Accredited Systems Integrator”, further solidifying its role in the blockchain ecosystem. Beyond these specific projects, other Finnish service providers are also embracing innovative technologies, including the use of AI to oversee the continuous operations of crypto-asset markets. This demonstrates a broad and deep commitment to advancing blockchain technology within Finland’s tech sector.

These examples highlight the dynamic use of blockchain technologies in Finland, spanning from consumer-focused applications to complex B2B solutions, and encompassing use cases in crypto-assets, non-fungible tokens (NFTs), tokenised financial instruments, and DeFi applications. This diverse application spectrum illustrates the significant integration of blockchain technology into both the financial sector and broader industries in Finland.

In Finland, ownership of crypto-assets is considered analogous to the ownership of objects, while also taking into account typical methods traditionally utilised in the financial sector. The starting point can be understood as when a particular crypto-asset is recorded on the blockchain at a specific address and a person has legal access to the private keys of the address, then said crypto-asset is in their ownership. However, this presumption can naturally be rebutted by presenting other evidence and information, such as details of any custody arrangements for the crypto-assets or other contracts related to the transaction.

To be more specific, the Finnish Supreme Court (Korkein Oikeus, or KKO) has evaluated the ownership of bitcoin in KKO 2020:64. In this case, the KKO interpreted that in the situation where the bitcoins of two different individuals (A and B) were stored in an account opened in the name of a third party in an external crypto-asset custody service, these ownerships became “mixed” when B became subject to enforcement proceedings ‒ ie, A’s ownership of the bitcoins was not considered legally valid in bankruptcy proceedings.

For clarity, the currently applicable VASP Act of Finland already requires VASPs to segregate customers’ crypto-assets from their own funds to avoid the risk of collusion. Hence, customer funds in VASPs’ services should be safe so long as the VASPs comply with applicable laws.

As can be seen from the foregoing, the ownership of crypto-assets is always resolved based on who has the most legally justified right to the crypto-asset. This is ensured through legislation requiring certain practices from industry players, on one hand, but is also supplemented by other evidence in individual transactions (eg, blockchain records and other agreements) that establishes ownership rights.

According to the VASP Act of Finland, a crypto-asset is a digital form of value that:

• has not been issued by a central bank or other authority and is not legal tender;
• individuals can use as a means of payment; and
• can be transferred, stored and exchanged electronically.

Notably, electronic money regulated through the EMD2 (including some stablecoins) is not classified as a crypto-asset under the VASP Act. However, this distinction will change with the forthcoming MiCA Regulation.

The Finnish legislation does not explicitly classify crypto-assets such as utility tokens, governance tokens, stablecoins, or asset-referenced tokens (ARTs) as securities or financial instruments. However, the determination of their status depends on the specific characteristics of each crypto-asset. Generally, crypto-assets have been treated as crypto-assets within the scope of the VASP Act of Finland, with certain stablecoins regulated under the Payment Institutions Act of Finland as electronic money. To date, there have been no instances where crypto-assets have been classified as securities or financial instruments in Finland.

As mentioned, MiCA will change the Finnish categorisation of crypto-assets. MiCA categorises crypto-assets as:

• asset-referenced tokens (ARTs);
• electronic money tokens (EMTs); and
• crypto-assets other than ARTs or EMTs (including utility tokens).

Additionally, MiCA recognises NFTs by setting them apart from the scope of MiCA, in the same way it excludes crypto-assets qualifying as financial instruments, deposits, or pensions. All of these categories are described in 2.3 Tokenised Securities.

According to MiCA, this does not apply to crypto-assets that qualify as financial instruments. To provide better certainty in identifying situations where a crypto-asset is considered a financial instrument, MiCA mandates the European Securities and Markets Authority (ESMA) to publish guidelines regarding this definition. The ESMA has indeed released the first consultation paper concerning these guidelines on 29 January 2024. The ESMA aims to provide guidelines that do not establish a one-size-fits-all approach to the notion of financial instruments and the definition of crypto-assets. Instead, it seeks to offer conditions and criteria to pinpoint specific areas of consideration. These can be used by national authorities and market participants in their assessments, allowing them to focus on essential attributes.

Although the ESMA is still taking comments relating to the given guidelines, there are already some characteristics that should be noted. Firstly, the ESMA aims to align its guidelines with the common principles used in regulations related to the financial sector and technology. Therefore, the ESMA emphasises that its guidelines should adhere to the principles of “same activities, same risks, same rules”, as well as “technology neutrality”. Secondly, the ESMA states that the definition for financial instrument given in the EU’s Markets in Financial Instruments Directive 2014 (“MiFID II”) shall still be used in the future. Hence, the following instruments are seen as financial instruments:

• transferable securities;
• money-market instruments;
• units of collective investment undertakings;
• various derivative contracts; and
• emission allowances – even though they would be on the blockchain.

Therefore, it can be already assumed that the assessment will continue to depend on the characteristics associated with a particular crypto-asset, which will be evaluated on a case-by-case basis. If the assessment leads to the conclusion that it qualifies as a financial instrument under MiFID II, it will fall outside the scope of MiCA, regardless of whether blockchain technology is involved in such crypto-asset. Similarly, if the crypto-asset does not qualify as a financial instrument under MiFID II, MiCA will apply to it.

As referenced in 2.2 Categorisation, the currently applicable VASP Act of Finland does not apply to stablecoins pegged to official currencies, as these stablecoins are regarded electronic money under the Payment Institution Act of Finland. Conversely, other stablecoins would likely be classified as crypto-assets without further specification of their stability characteristics in accordance with the same Act. However, MiCA will supersede the VASP Act of Finland on 30 December 2024, once MiCA becomes wholly applicable in the EU.

MiCA provides clear definitions of stablecoins:

• an ART is defined as “a type of crypto-asset that is not an EMT and that purports to maintain a stable value by referencing another value or right or a combination thereof, including one or more official currencies”; and
• an EMT is defined as “a type of crypto-asset that purports to maintain a stable value by referencing the value of one official currency”.

To be more specific, if a stablecoin would backed by algorithm and/or other assets (eg, gold), it would be an ART, and if a stablecoin is backed on par-to-par value by official currency (eg, euro), it is an EMT. The differences in licensing between the issuers of ARTs and EMTs are examined in 4.1.2 Licensing.

Lastly, as already covered in 1.2 Business Models, it is important – if repetitive – to highlight that, as of January 2022, Finland already has a MiCA-compliant EUR-based stablecoin in the market (namely, EUROe). EUROe is issued by Membrane Finance Oy, which is a licensed EMI in Finland. This fact alone makes Finland stand apart as the forerunner in the EU stablecoin market.

As mentioned in 2.2 Categorisation, according to MiCA, NFTs fall outside its scope of application. In MiCA, NFTs are described as crypto-assets that are unique and not fungible with other crypto-assets. Although NFTs are not subject to MiCA and are thus described only briefly, the Recitals of MiCA actually provide a wealth of information about the legal status of NFTs.

It is crucial to recognise that NFTs are inherently unique and non-fungible, distinguishing them from other crypto-assets. Unlike other crypto-assets, even though it is possible to speculate NFTs’ value on the market, the value of an NFT cannot be assessed by comparing it to others in the market. Instead, each NFT holds distinct, intrinsic value due to its uniqueness. By way of example, digital art is a prime example of NFTs.

In Finland, crypto-assets are recognised as a valid form of payment, with various payment service providers offering crypto-asset services as VASPs as well. However, the utilisation of crypto-assets for routine payments has been limited, owing to the tax implications associated with their use. As outlined in 6.1 Tax Regime, every transaction using crypto-assets as a means of payment may trigger a taxable event, which has deterred widespread adoption for smaller, everyday transactions.

Despite these challenges, there is notable traction in using crypto-assets for large-scale financial transactions. Several funding rounds have successfully employed crypto-asset payments, indicating a growing acceptance and utility of substantial monetary exchanges where the benefits may outweigh potential tax liabilities.

Furthermore, the anticipation of EMTs becoming more integrated into payment systems aligns with existing trends and experiences concerning electronic money. Therefore, as the relevant regulations take effect and provide a clearer, more stable framework for crypto-asset payments, it is reasonable to expect that the use of crypto-assets for payments in Finland will see a significant increase ‒ particularly for transactions where traditional payment methods may not be as effective or desirable.

In Finland, there are no legal/regulatory issues relating to the use of crypto-assets in collateral arrangements – provided that the arrangement is implemented with sufficient legal diligence, using the appropriate contracts. In fact, at least one operator in Finland has been offering a separate credit product, where the customer’s crypto-assets are used as collateral for the credit provided by that company.

Currently, in Finland, there is no regulation explicitly prohibiting the use of smart contracts. However, smart contracts have been acknowledged in the Data Act – the application of which is set to begin in September 2025 throughout the entire EU. The Data Act will eventually impose certain essential requirements on smart contracts falling within its scope. Among these requirements are a mechanism to cease the ongoing execution of transactions, as well as the inclusion of internal functions within the smart contract that allow for termination and guidance to stop or suspend the contract’s operation, especially to prevent unintentional execution in the future.

In practice, there are no obstacles for two private parties wishing to establish a contractual relationship utilising smart contracts, as Finland upholds broad freedom of contract. The authors’ experience includes drafting agreements where, for instance, a portion of the received fee was automatically distributed among various parties using a self-created smart contract. However, it must be said that ‒ given the smart contracts are computer code ‒ there is a necessity for clear legal and contractual agreements between parties regarding the usage of smart contract.

When MiCA becomes wholly applicable on 30 December 2024, traditional financial sector actors (eg, banks) will also be given the opportunity to incorporate crypto-asset services into their service offerings, typically by simply notifying the FIN-FSA. In addition, credit institutions will be specifically granted the right to start issuing ARTs or EMTs under certain conditions.

That being said, it has already been possible for AIFMs to invest in crypto-assets if it is done in accordance with the AIFM Act of Finland. Nordic Law has been directly involved in pioneering the registration of the first crypto-asset-based AIFM in Finland.

The EU introduced the “DLT Pilot Regime” through Regulation (EU) 2022/858. This regime aims to establish requirements for entities interested in testing blockchain-based multilateral trading facilities, settlement systems, or trading and settlement systems. It grants specific exemptions from their usual requirements. Finnish entities have had the opportunity to participate in the DLT Pilot Regime and Nordic Law is aware of the participation of at least one Finnish entity thus far.

With regard to blockchain technology, Finland’s national legislation has largely progressed through the implementation of EU Directives. Although Finland has not specifically enacted international standards, it is worth noting that proposals from organisations such as Financial Action Task Force (FATF) and the Bank for International Settlements (BIS) are followed at both the Finnish and EU levels. Therefore, proposals given by FATF and the BIS are typically incorporated into Finland’s legislation over time.

The FIN-FSA stands out as the primary authority for regulating crypto-assets, renowned for its transparent procedures and highly skilled personnel. It offers accessible guidance and interpretation support for licence applications related to crypto-assets. Moreover, the FIN-FSA regularly publishes regulations and guidelines, ensuring clarity and consistency in regulatory compliance.

At the moment, there are no self-regulatory organisations in Finland that produce self-regulation related to crypto-assets.

In this context, it is important to mention Sitra, the Finnish Innovation Fund operating under the Parliament of Finland. Sitra has actively endeavoured to provide policymakers with new insights into blockchain technology and crypto-assets. The organisation maintains a positive attitude towards blockchain technology and the potential of Web3 in Finland, recognising them as significant opportunities for the Finnish economy. Furthermore, Sitra has initiated a programme that funds seven selected Web3 projects through various calls for proposals, in collaboration with its partner companies.

In Finland, there have not been any significant judicial decisions or litigations regarding the use of blockchain in recent months. However, as mentioned in 2.1 Ownership, there was a Finnish Supreme Court case concerning the ownership of bitcoin held by the same custody service provider (see KKO 2020:64). Additionally, besides civil matters, the Supreme Administrative Court of Finland has addressed the taxation of crypto-assets, which will be further examined in detail in 6.1 Tax Regime.

That being said, and in referral to 1.1 Evolution of the Blockchain Market, it is presumable that litigation may arise due to the bankruptcy of FTX and its impacts on the Finnish market.

Given Finland’s adherence to a civil law legal system, the legal framework is primarily shaped by the enactment of new legislation rather than relying on court rulings. This principle extends to the regulation of blockchain technology, as demonstrated by the enactment of the VASP Act of Finland.

As previously mentioned, Finland does not regulate the use of blockchain technology at a general level. However, the Finnish authorities have been relatively active in assisting companies involved in blockchain technology insofar as their operations are of particular regulatory significance. Such situations typically arise when the operator needs to apply for a separate licence for their operations (see 4.1.2 Licensing) or if the operation results in additional tax consequences (see 6.1 Tax Regime).

By way of example, the FIN-FSA has published regulations and guidelines for VASPs, which include several specific guidelines on how to organise services, as well as some mandatory orders. That being said, the FIN-FSA’s website is also fully translated into English to help operators find information about different financial licences and specific requirements set for them. In another example, the Finnish Tax Administration has published tax guidance concerning the taxation of crypto-assets.

From a general perspective, Finland is considered one of the safest countries in which to establish operations. The nation offers legal certainty, adheres strictly to the rule of law, and is characterised by the absence of arbitrary decisions. Finnish authorities are known for their fairness and the regulatory environment is marked by clear, well-defined rules. This transparent legal framework, combined with a supportive ecosystem for innovation, makes Finland an attractive destination for fintech companies seeking a stable and reliable base for their operations. This especially true now, when ‒ by contrast ‒ the Baltic states have been experiencing instability, with active revocations of previously granted fintech registrations, authorisations, and licences.

With regard to taxation of crypto-assets, there is no separate law; however, the Finnish Tax Administration has provided guidance on their tax treatment. Tax issues related to crypto-assets have also been examined in the Supreme Administrative Court (see KHO:2019:42). Consequently, a practice has been established in Finland whereby crypto-assets are taxed as commodities. This means that, in general, every disposal (eg, sale or trade) of a crypto-asset triggers taxation but actions such as staking a crypto-asset may not typically be considered a disposal for tax purposes, as the crypto-asset is not disposed permanently ‒ although generated revenue from staking shall be taxable income.

It can be said that the taxation of crypto-assets in Finland is relatively established and it generally does not involve significant uncertainties. If and when ambiguous situations arise, especially with the emergence of new crypto-asset-related investment products, Finnish tax legislation allows for seeking a precedent decision from the Finnish Tax Administration. The authors have assisted several clients in this regard over the years, with successful outcomes. Collaboration with the Finnish Tax Administration is usually smooth and they have a few officials with excellent expertise in the field.

The currently applicable VASP Act of Finland does not include regulations concerning ESG or sustainable finance. As a result, there are no official guidelines or metrics established within this framework for assessing the environmental impact of crypto-assets or the blockchain technology that underpins them. However, MiCA introduces more stringent requirements. Under MiCA, it is mandatory for crypto-asset White Papers to disclose detailed information regarding the principal adverse impacts on the climate, as well as other environmental drawbacks associated with the consensus mechanism used in the issuance of the crypto-asset. This requirement aims to increase transparency and inform stakeholders about the environmental footprint of crypto-assets.

The primary rule under MiCA is that the entity offering a crypto-asset or seeking its admission to trading must prepare a White Paper that includes all required information. This White Paper serves as a reliable source for third parties, including CASPs, who are permitted to depend on the information provided in these documents. Additionally, MiCA mandates that CASPs must make this environmental impact information readily available and ensure it is prominently displayed on their websites so as to ensure transparency for consumers.

MiCA also acknowledges the necessity for uniformity and clarity in the technical standards applicable across the sector. To achieve this, MiCA obligates the ESMA – in close collaboration with the European Banking Authority (EBA) ‒ to develop draft regulatory technical standards. These standards are intended to guide the content, methodologies, and presentation of information that must be included in crypto-assets White Papers. Furthermore, these standards apply to the information that CASPs are required to publish, thereby fostering a fair and transparent business environment for all stakeholders in the crypto-asset space.

The data protection legislation of Finland relies heavily on the EU General Data Protection Regulation (GDPR). However, Finland has certain national acts that regulate data protection ‒ for example, the Data Protection Act (1050/2018), the Accounting Act (1336/1997) and the AML Act of Finland. Specifically, the AML Act of Finland regulates previously registered companies that ‒ with the advent of MiCA ‒ will transition to authorised entities, as well as licensed operators that have an obligation to retain customer data for at least five years from the date the customer relationship ended. With regard to the “right to be forgotten”, the provisions of the GDPR are the primary source of law; however, the GDPR recognises situations where the right to be forgotten is overridden to comply with a processing requirement based on EU law or the legislation of an EU member state. Therefore, the right of the customer to be forgotten recedes, owing to the AML Act of Finland.

As regards the application of MiCA to data privacy, MiCA introduces specific provisions concerning the treatment of personal data. Notably, MiCA clarifies that a crypto-asset should not be considered as being offered for free if the offer involves the exchange of personal data. This implies that any transaction involving crypto-assets that requires personal data in return could be subject to data protection regulations, thus emphasising the need for compliance with GDPR requirements when handling such transactions.