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Estonia planning to launch crypto-tokens to drive growth of the country’s e-resident community

Estonia planning to launch crypto-tokens to drive growth of the country’s e-resident community

Estonia is planning to launch its own crypto-token, called
estcoin, to help build Estonia’s e-resident community and increase the number
of companies started in Estonia through e-Residency.
The idea was floated initially in August 2017.

In a blog
post on Medium
,  Kaspar Korjus, Managing
Director, Estonia’s e-Residency programme, laid out the thought process leading
up to the idea of Estcoin, talked about the feedback received, and explored
three possible ways in which Estcoin might work.

Background and
current status of the e-Residency programme

Estonia became the first country in the world to launch an e-Residency
programme back in 2014. Anyone from around the world can apply. If granted e-Residency,
person receives a government-issued digital ID card that allows them access to
e-services. Most e-services available for e-residents currently are business
related, so entrepreneurs will benefit most from e-Residency.

E-Residents can
digitally sign documents and contracts, verify the authenticity of signed
documents, encrypt and transmit documents securely, establish an Estonian
company online and administer the company from anywhere in the world, conduct
e-banking and remote money transfers, access online payment service providers
and declare Estonian taxes online.

The programme began with a goal of attracting 10 million
e-residents to add to Estonia’s physical population of 1.3 million by 2025.

By November 2017, nearly 30,000 people from 139 countries
had signed up. At the moment, the biggest motivation for signing up is to
establish a company. Companies established through e-Residency are ‘trusted
location-independent EU companies, which can be run remotely from anywhere on
Earth with low costs, minimal hassle and access to all the tools needed to grow
globally, such as international payment providers’, as another
blog post on the types of e-residents
explains.

In the first three years e-residents are estimated
to have brought €14.4 million
back to Estonia. This is predicted to rise to
€1.8 billion by 2025, effectively a return of €100 for every €1 invested in the
programme.

Against this background context, Mr. Korjus proposes three
potential use cases of the estcoin.

Three use cases

The first proposed use case is a community estcoin would be structured to support the objective of
growing the e-residency programme by incentivising more people around the world
to apply for and make greater use of e-Residency.

This includes encouraging investors and entrepreneurs to use
e-Residency as their platform for trusted ICO activity (Initial Coin Offering [1]).

(The blog post says
that many companies are in the process of launching or planning to launch ICOs
through e-Residency. They are exploring ways to integrate the e-Residency card
into their KYC procedure. There have been valid concerns raised over
transparency and fraud in ICOs and many central banks around the world have warned
investors about the risks.
In this scenario, Estonia can provide
clearer guidance on how to legally and responsibly launch an ICO within the
country’s regulatory environment, focusing on trusted, responsible ICOs. If
successfully done, this could help create a decentralised and trusted
peer-to-peer securities trading globally through e-Residency.
)

The community estcoin would incentivise greater interaction
within the e-resident community. E-residents who raise awareness of the
programme by sharing their experiences, drive traffic to the website and
signs-ups, offer advice to other e-residents, or post a tender that provides
work to another e-resident or Estonian company, would be able to earn estcoins.

Any funds raised could be used to further develop the
platform, and provide investment into companies that operate within Estonia’s
business environment.

Businesses offering services such as accountancy, banking or
virtual offices to the e-resident community could be encouraged to integrate
estcoin.  

Mr. Korjus notes that a national ICO to launch community
estcoins would most probably require the creation of a Public-Private
Partnership because no single organisation should have control of both the
tokens and the allocation of any funds raised. He goes on to say that community
estcoins should be openly tradable on both traditional and crypto exchanges and
that most likely a lock-in period will be featured to discourage speculators.

The second proposed use case is an identity estcoin. Here, estcoins would be the blockchain-based
tokens used for activities, such as digitally signing documents, logging into
services or enforcing smart contracts.

Estonians and e-residents would receive a certain amount of
tokens that are attached to their personal digital identity and can then
acquire more when required. Identity estcoins will not be exchanged or
sold. Their value would decrease as the e-Residency programme grows and more
people join the network and the cost of transactions would also go down
steadily over time, due to economies of scale.

Estonian Police and Border Guard Board could have the
ability to revoke tokens if e-residents break any laws.

Identity estcoins would work with any device and never
require updates. This would improve the reliability, security and transparency
of the country’s digital infrastructure.

The third use case is the Euro estcoin, which would be pegged to the value of the Euro. Banks
would be required to move money in and out of euro estcoins, but transactions
could then take place independently of them through the blockchain. Basically,
this would mean that the global Estonian e-resident community could get rid of cross-border
transaction costs.

This could be looked at as an alternative to the Euro. Mr.
Korjus clarifies in the post, “We would never provide an alternative currency
to the euro, but it’s possible that we could combine some of the decentralised
advantages of crypto with the stability and trust of fiat currency and then
limit its use within the e-resident community.”

[1] ICOs involve the opportunity for individual
investors to exchange fiat currency or cryptocurrencies with liquid value in
return for a digital asset labeled as a coin or token. Startups use this to
avoid the rigorous and regulated pathways of going via banks or venture capital
firms or doing a regular IPO (Initial Public Offering or the initial offer of
shares of previously private company to the public).

Featured image: maigi/ CC BY-SA 3.0