18 Feb 2018 · 3 min read

Estonian Crypto PR Bumps Into the Law

A blog post from an Estonian government official about a new crypto-token, estcoin, has added to widespread excitement over the Baltic country and its plans for using cryptocurrencies and the blockchain. Should investors in crypto matters look to Estonia next?

On the official blog of Estonian e-Residency (the government-run organization that issues official ID cards for the setting-up and basing of companies in Estonia by non-residents of the country), e-Residency Managing Director Kaspar Korjus explained the concept behind estcoin. "[They] were proposed as a way to raise money and support for the development of our digital nation. We would also want to structure the tokens so that they help build our e-resident community and incentivise our own key objective, which is to increase the number of companies started in Estonia through e-Residency."

Estonia, as a European Union member state, is tightly tied into the European Central Bank framework, meaning it cannot launch a full cryptocurrency. Korjus acknowledges this. "Much of the criticism of estcoin was based on the fact that Estonia simply can’t start its own cryptocurrency even if it wanted to...That’s why we have always referred to estcoin as a proposed 'crypto token'."

Siiri Suutre, from the Public Relations Department of the Estonian Ministry of Finance, exercises restrained enthusiasm on the details of Estonia's future plans. "The e-Residency team has come up with the idea of an estcoin, which is envisaged to be an official crypto-token of the Estonian State. The Ministry of Finance, and also the Central Bank of Estonia, are more cautious in this regard. We are aware that it is important for Estonia to endorse innovation but we have to balance it with consumer and investor protection and financial stability issues."

According to Suutre, there is a fundamental philosophical or ideological question – how much endorsement or interference from the state does the cryptocurrency community really want?

“We don’t anticipate that cryptocurrencies will acquire systemic importance as means of payment in the near future but of course we are monitoring the situation and how it develops. We do believe that cyptocurrencies and the underlying technologies are going to play a certain role in the financial sector,” Suutre said. However, she added that the markets and the technologies will have to mature quite a bit.

The Ministry of Finance published a study in 2016 into the possibility of a policy for recognizing and using cryptocurrencies. Suutre explained, "The main conclusion was that outside the financial sector, there aren’t currently any noticeable legal obstacles for private parties to agree upon paying for goods and services in cryptocurrencies, as far as we know."

Some may argue with the assertion that there are no "noticeable legal obstacles."

Law vs. PR

Dutchman Otto de Voogd, these days based in his country of birth, once ran the website referenced by Enberg, btc.ee, which facilitated trades. Back in 2014, de Voogd was contacted by law enforcement, who requested the names, and Estonian ID card numbers, of all Estonia-based Bitcoin traders his site was in contact with. He was also asked to acknowledge that his site was a financial services provider, and was as such covered by the Financial Services Act. The end result was de Voogd shutting down his site and moving his business out of the country.

When asked for a comment for this article, de Voogd added, on the difference between the bold plans for estcoin and the more tentative reaction of the Ministry of Finance, "[e-Residency] certainly have the upper hand in the PR department, but in spite of all that, the restrictive laws still stand, so I'm guessing their power is somewhat limited to publishing nice press statements."

Estonia has, in spite of this criticism from the crypto community, proved itself in other respects a good country in which to start a business, thanks to an efficient e-services infrastructure. Not only that, there are hundreds of Estonian tech startups who are garnering global interest due to doing things in an innovative and eye-catching way. Suutre cited Estonian-run Funderbeam, a blockchain-powered online stock exchange, as an example.

Due to Estonia's recent history as a startup hotbed, it's highly likely that, on the heels of estcoin, there will be a panoply of other crypto-solutions proposed by Estonian private businesses, while Funderbeam is one of several innovative enterprises in the country using the blockchain. However, it is equally true that cryptocurrencies, while legal to use in Estonia, and while officially tolerated, are hardly being welcomed with open arms by all areas of government, and cryptocurrency traders will hope to see a change in this regard.