Best Bitcoin Card for Estonia

Estonia could become the first country in the world with a virtual currency, the Estcoin. The problem is that the country’s official currency is the euro and membership of the euro zone does not allow any other parallel (crypto) currency. What can Tallinn get out of this situation?

“Crypto” is the new sexy one. The boom of the market with crypto currencies gave governments all over the world the idea to create their own. And while big countries like Russia, China or Japan are working day and night to digitize their local currencies, it may end up being a small European country that could win this race.

Estonia was the first country in the world to fall victim to a massive hacker attack in 2007 that completely paralysed the country. Instead of lamenting and accusing the Kremlin, the Estonian government, inspired by the rule “what doesn’t kill me hardens me”, has decided to turn this attack into an advantage.

Estonia has become the promised land of digitisation. Public Wi-Fi is powerful and available everywhere, credit cards are accepted everywhere, and thanks to the digital system, the state administration is more transparent and efficient than anywhere else. The success has been so overwhelming that the Estonian government has decided to share the benefits of digitisation with others.

About the person

Adéla Klečková is programme manager of the Friedrich Naumann Foundation for Freedom for Central Europe and the Baltic States.

The Estonian government has created the concept of e-residency, which enables everyone to live in Estonia. At the beginning of this project in 2014, it was joked that Estonia would gain more new citizens each year through e-residency than through birth. This joke was soon surpassed by reality: More than 24,000 people all over the world have already become e-Estonians and there have been more than 4200 new business start-ups in this way.

Three approaches

However, this digital idyll does not change the fact that Tallinn, as a member of the euro zone, is not allowed to create parallel currencies. The head of the European Central Bank, Mario Draghi, has clearly positioned himself.

But Kaspar Korjus, founder and managing director of the state e-residency agency and Estcoin’s spiritual father, may already have found a way out.

There are three ways in which the Estonian crypto currency Estcoin can function despite the ECB’s scepticism:

• In the first scenario, in a growing Estonian e-citizenship, Estcoin could serve as a reward for those working to develop the programme.
• The second option would be something like an Estcoin account linked to the right to be an Estonian citizen – as part, so to speak, of Estonian identity. The coupons would no longer be tradable, but would represent something like a points account. As with the German traffic offender card index in Flensburg, Estcoin points would be deducted from the account if there was misconduct (court conviction, etc.). Non-profit activities would again be rewarded. The score could be taken into account when evaluating applicants for jobs or the like. It is doubtful whether such a system of non-tradable coupons would still be a currency in the true sense. It resembles more a monitoring system and is reminiscent of the “social points system” that the Chinese government is imposing on its citizens. There are doubts as to whether it is compatible with European rules on the protection of privacy.
• The third – and much more sensible – option being considered in Estonia is to create an alternative currency, bind it firmly to the euro and then trade it in virtual space. This would, however, require the Estonian Government to cover every single Estcoin with euros in real terms. Here, the Estcoin could indeed become the future for Europe, because a means of payment that simplifies international trade offers great opportunities in terms of global competitiveness. The EU should therefore not ignore this argument.

According to Korjus, a digital currency in Europe could act as a modern tool for global trade, keeping pace with rapid technological development on a global scale.

Greedy Asia

Larger players such as Russia, China and Japan are also working intensively on digitizing their own currencies. China already dominates the Bitcoin market. Beijing has already set up a team of experts for crypto currency research in 2014. The Chinese central bank announced in 2016 that it would soon introduce its own crypto currency. A crypto currency would be another means for the ruling communists to control their citizens.

A Japanese banking group led by Mizuho financial group is on its way to create its own crypto currency “J Coin”, which would be 1:1 in relation to the euro. Tokyo wants to launch its J Coin before the Olympic Games in Tokyo in 2020.

Despite its popularity, the crypto currency market has experienced a significant decline. Bitcoin’s value before Christmas was 20,000 dollars; now it’s less than half. So the 1 million Euro Estcoin question is: Is it worth creating a new currency?

“It is clear that Bitcoin’s price is overwhelmingly inflated, but we should not give up the whole idea. The bubble around the Bitcoin does not reflect the potential of the crypto economy,” says Kaspar Korjus, “we want to use the Estcoin project as a tool to create a new world, not as another instrument of speculation or additional commodity.