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Estonia is striving to be center stage in cryptocurrencies and blockchain

Blockchain is the fad of the moment. Everybody you know has heard about the skyrocketing price of Bitcoin, the underlying technology of which is based on cryptographic components from the blockchain. At a time when most of the world is cautious about cryptocurrencies, Estonia has already fully embraced it. At least the technological part of it.

The Estonian national digital identification system already started using a variation of blockchain in 2008. In 2016, the Estonian government was looking for new and innovative ways to secure the health records for its 1.3 million residents. It turned to blockchain. Now all of our health records, which have been fully digitized for quite a while now, are safely guarded by the same technology used by Bitcoin.

E-Residency is looking towards ICOs

There are many more examples of blockchain being used in the public and private sector in Estonia. If you have a great interest in starting a new cryptocurrency or to raise funds for your next world-changing idea then look no further than the famous e-Residency program.

The team behind e-Residency, which is backed by the Estonian government, has been hard at work looking for opportunities to ensure the legitimacy of cryptocurrencies and ICOs (initial coin offerings), which have had their fair share of scammers exploiting them.

The head of public relations at e-Residency, Arnaud Castaignet tells us that they know people in the administration who are working to make Estonia a very crypto-friendly jurisdiction for trusted ICOs.

Although the team behind e-Residency has been working on a few different cryptocurrency ideas none of them are ready for prime time at the moment. One of the most promising ideas involves the aforementioned trusted ICOs. Right now there are a lot of scam artists who start an ICO just to steal people’s hard earned money and run off with it. Trusted ICOs means that the people behind the initial coin offerings have been fully vetted by the Estonian government and hold e-Residency status, which means their backgrounds have been checked by the Police and Border Guard Board. This gives a sense of security to potential investors that the people running the ICO have no known ties to terrorism, money-laundering and other illegal activities.

‘To our tremendous surprise, the first thing we discovered was that there were many aspects of Estonia’s business environment that crypto entrepreneurs already hugely favored, from 100% online cross-border management to a 0% corporate tax on undistributed profits. In addition, our secure digital identities can be used as part of the KYC (Know Your Customer) procedures that would otherwise cost companies both more time and more money when they need to verify identities of investors and customers,’ says Castaignet.

Blockhive never even considered another country for their business

Again, this is just one of the ideas they are working on but there are already companies embracing it. One of them is Blockhive which is mostly based in Estonia but has roots in Japan. Another part of the team works from Vietnam. Blockhive’s co-founder Hikaru Kusaka tells Life in Estonia that they never even considered another EU member state to launch their global business. Kusaka says they chose Estonia because they saw that the future of society is here.

‘We have a clear reason why we are here in Estonia. No other country but Estonia has done more to use blockchain in their e-government system which dramatically changes citizens’ daily lives,’ Kusaka states.

According to Blockhive’s co-founder, their experience in Estonia has been great so far and they have made a lot of powerful partnerships with local startups as well as a law firm and an energy company.

Blockhive has been in the blockchain space since 2013 and they have different ventures going on right now. Back in November 2017 they started a cryptocurrency mine at PAKRI Science and Industrial City, which is about 50 kilometers away from Tallinn.

They are also behind a smart wallet app called “eesty”, which can be used to store, hold and send cryptocurrencies. Aside from all of that the company is creating practical and innovative solutions for traditional companies in the form of partnerships, Blockhive also incubates projects that have the potential to benefit from blockchain technology.

For businesses planning an ICO, Kusaka recommends an environment like Estonia where regulators and innovators can communicate closely with each other to bring ideas together to build a better society.

‘Recently I’ve heard that many startups planning ICOs chose to be based in the Isle of Man or Seychelles. Perhaps it is because of tax advantages and no strict regulations in regard to cryptocurrencies and ICOs. But if the companies are really and seriously considering their business with a longer vision in this space, we recommend Estonia.’

Change Bank has a new look at old solutions

Another international company that has chosen Estonia to be their base is Change Bank. The mission of Change Bank is to make money simple.

‘We believe that everyone everywhere should have the power to easily manage their own finances. Combining a multi-currency wallet, global payment card, and a financial services marketplace, we’re bringing all personal finance services to one smooth application,’ says the founder and CEO of Change Bank, Kristjan Kangro.

The company was founded in Singapore two years ago to build the first challenger bank in Southeast Asia. After raising over 17.5 million US dollars last year, the company decided to increase the scope of their vision and create a global financial institution instead of focusing on the Southeast Asian region.

Kangro says the team saw that the 500-million-person EU market would be a more favorable start for a global fintech company than Singapore’s 5 million person market.

‘Estonia’s world-famous startup ecosystem, abundance of tech talent, and the fact that most of us are Estonians meant Estonia was the obvious choice to set up our headquarters. As we are operating in a highly regulated financial sector there is an obvious need for close communication with the regulator. A small, interconnected and tech-savvy country has a real advantage here. We have had good access to the Estonian FSA through its FinTech initiative and we are looking forward to cooperating even more closely in our next licensing phase,’ says Kangro.

Only six months after raising a whopping amount of money with a token sale, a lot has happened with Change Bank. Kangro has ambitious goals for his company, the team is aiming high and expecting to be one of the leading Fintech companies in Europe within the next few years.

‘Back in October, we had 4 people in a 15-square-metre windowless office in Singapore and a vision to change the financial system. Today, our team has close to 20 members, and we are constantly growing. We’re expecting to launch our mobile wallet in a few months, and in parallel working towards making our payment cards available this year.’

Kangro sees Estonia as a great option for companies who want to offer their product in the EU market.

‘Estonia has a strong track record of successful companies and a government that thinks like a startup. Smaller countries are generally more agile and nimble, have shorter feedback loops between startups and regulators, and changes can be implemented quicker than in larger countries.’

Quick and decisive decisions from the regulator

A sign of nimble and fast thinking comes from the Estonian Financial Supervision Authority (EFSA) known as Finantsinspektsioon, which recently published a comprehensive legal framework overview of ICOs in Estonia.

EFSA is of the opinion that tokens (which are issued during ICOs), depending on their structure, might be considered securities according to the definition set forth in the current Securities Market Act as well as in the Law of Obligations Act. Then again, they see that every ICO is unique and should be assessed by its own characteristics.

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