Self registration multibyte characters

[Inzman]

Hi!
I have a problem with Self Registration module. When a user tries to register with a username that contains multibyte characters (üõäö in Estonian language), they get an error "Username is invalid (too long, too short, or contains invalid characters). Hint- Usernames must contain only alphanumeric characters (no spaces)". Is this a known thing or has someone experienced this?
Maybe there is a setting somewhere that I haven't noticed?

Using:
PHP Version 5.2.14
CMS 1.9
CGExtensions 1.22.1
CGSimpleSmarty 1.4.7
FrontEndUsers 1.12.8
SelfRegistration 1.6.7