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Bitcoin Broker Mounts Legal Challenge to Order to Desist

A Tallinn-based currency trader is taking the Estonian police to court in an attempt to safeguard his bitcoin-trading website.

As reported by ERR News, Otto de Voogd was forced to temporarily suspend his website, btc.ee, after receiving a cease and desist notice.

De Voogd, who describes the buying and selling of the cryptocurrency as his hobby, had earlier been sent a precept requiring that he acknowledge that btc.ee is a financial services provider in Estonia, and is therefore covered by the Financial Services Act. De Voogd, a Dutch citizen, disputes this, arguing that it is merely a website providing prices at which it is possible to trade bitcoins, and that a second or third contact, outside of the website, would have to be made in order to make the trade.

De Voogd told ERR News that he felt he had no choice other than to go to court, appealing against the demands being placed on him and his business by authorities. When asked what he hoped to achieve from the court case, he replied that he wanted the precept invalidated, along with the part of the relevant law which requires anyone trading bitcoins to be met in person, with photocopies of Estonian ID cards retained.

"I would qualify this particular law as anti-innovation and anti-business, one that certainly makes it impossible to start any serious Bitcoin or other cryptocurrency business in Estonia," de Voogd said.  

"A true shame for a country that wants to be on the forefront of the digital revolution - although I presume that lawmakers never intended it to be interpreted to apply to Bitcoins in the way that the police tries to apply it now," he said, voicing the opinion that this dispute would never have occurred in the Netherlands due to that country's differing interpretation of the financial services law.

When asked why he felt the Estonian authorities were taking such arguably concerted action relating to his website, De Voogd continued, "it's probably fear of losing control. The same fear that many governments had, and some still have, concerning the Internet, where anybody can speak his mind."

"There is also the fear that Bitcoin could be used for illicit activities, but then so can cash. Incidentally Bitcoin is not as anonymous as cash. With Bitcoins there is always a public trace from one account to another."

"The currency most used to finance, drugs, human trafficking, illicit weapons trade, child porn and war is the US dollar, with the euro in second place. In comparison Bitcoin doesn't even show up on the chart. It's fairly hypocritical for states to worry about how Bitcoins can be used, when their own far more anonymous money is used to enable a huge worldwide market in illicit and deadly activities."

The website owner felt that his case was not a test case for the policy of any other government, and merely pertained to Estonian law.

"The test case that I see for the Estonian government is to show if they are truly interested in being leaders of the digital revolution, by coming up with some decent regulation soon regarding Bitcoin," de Voogd said. "At most my case can serve as a catalyst to that process."

He alleged government double standards in Estonia, having given indication by the Ministry of Finance it is waiting for advice from the EU and the European Central Bank. "Waiting for a cue from Brussels or Frankfurt must be a new thing," he said, "because when they abolished the tax on reinvested profits, I don't recall that they waited for advice from the EU."

Kristiina Kaljurand, head specialist of the department of financial markets policy at the Ministry of Finance, said in reponse: "Use and regulation of virtual currency is still under discussion in the European Union and at a member states level, and we are waiting for an EU wide ruling. Trading Bitcoins is not illegal, but can be done as a professional activity after registration and following AML/CFT rules as provided in the Money laundering terrorist financing prevention Act."

"From the Act - a provider of services of alternative means of payment is a person who in its economic or professional activities and through a communications, transfer or clearing system buys, sells or mediates funds of monetary value by which financial obligations can be performed or which can be exchanged for an official currency. According to the Money Laundering and Terrorist Financing Prevention Act, the providers of services of alternative means of payment are obliged to follow certain requirements to prevent money laundering and terrorist financing," she said.

It has been pointed out on social media by critics of the trader's stance that the defense of only providing links to activity external to the site was one used by illegal downloading sites such as Pirate Bay. The argument runs that, whether providing links or actually hosting trades on a website, the intention is the same - to execute that trade. He refused to respond to the assertion, but said instead, "The better question is, are banks responsible for how their customers use cash they get from ATMs and are central banks responsible for how people use the cash they issued? Why should it be any different for Bitcoins?"

As previously reported, Bitcoin is one of several cryptocurrencies that are available globally. A cryptocurrency uses cryptography to control the creation and payment of money. This, and the fact that it is a currency that is bought and sold on a peer-to-peer system, with no "central bank", has raised regulatory questions for many states.

De Voogd is represented by Priit Lätt from the law firm Glimstedt.

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