When Kaspar Korjus, director of Estonia's e-Residency program, first pitched the idea of Estonia launching its own cryptocurrency this summer, it was not well received by the Bank of Estonia. On Tuesday, however, Korjus announced that the idea is still in the works.
The startup world is being rapidly transformed by initial coin offerings (ICOs), Korjus wrote in the official e-Residency blog on Tuesday.
According to the program director, three possible variations of the proposed estcoin are currently under consideration which could benefit the state.
"The community estcoin would be structured to support the objective of growing our new digital nation by incentivizing more people around the world to apply for and make greater use of e-Residency," Korjus wrote. "This includes encouraging investors and entrepreneurs to use e-Residency as their platform for trusted ICO activity."
E-residents could earn estcoins by driving web traffic to e-Residency, successfully signing up new e-residents, posting tenders within the e-Residency community that provides work to another e-resident or Estonian company, or spending time providing useful advice to other e-residents, for example.
A second variant, the identity estcoin, would have the cryptocurrency serve as blockchain-based tokens used within Estonia's digital society 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 personal and attached to their digital identity and can then acquire more when required," Korjus explained. "Even if these identity estcoins would need to be purchased, this would not raise any additional revenue for Estonia, but merely contribute to the maintenance of the network. In fact, everyone would save money as a result of this proposal."
Unlike with the previous model, identity estcoins could not be exchanged or sold as they are part of a user's identity. "In fact, the value of them would decrease as the e-Residency program grows and more people join the network; this would create an economy of scale, which constantly lowers the cost of transactions over time," Korjus noted. This system would enable even greater transparency within the e-Residency business environment, which is the key reason why people become e-residents; transparency provides them with the trust needed to more easily conduct business globally.
The third variant under consideration is the euro estcoin, whose value would be pegged to the euro. Such an estcoin would not be provided as an alternative currency to the euro, but it could combine some of the decentralized advantages of cryptocurrencies with the stability and trust of a fiat currency.
"We will continue to develop these proposals with the public and private sector in Estonia, as well as with crypto entrepreneurs, investors and potential private sector partners around the world," Korjus wrote, adding that change is coming and that Estonia must ensure it is on the front lines of these changes.
Central bank: Creators themselves unsure what problems they are solving
When Korjus first introduced the estcoin concept in August, the Bank of Estonia commented that the idea was still in its very early stages, and exactly what societal problem the adoption of the estcoin would solve and what would improve in Estonia as a result of the entry of the estcoin into the market was questionable.
The subject came up again on Tuesday, at the cenral bank's presentation of its fresh economic growth estimate, when Bank of Estonia governor Ardo Hansson repeated the view that the estcoin concept was still in a very early stage, insofar as the creators of the concept still remained unsure exactly what problems they would be solving.
"As far as we know, this is not a proposal by the Estonian government, and the central bank likewise has not been consulted on this matter," said the central bank governor. "We will apparently read it and see what exactly this proposal says. But if it involves issuing money, then this is definitely a topic which will definitely be addressed by the central bank and not the government or government agencies."
Hansson added that if anyone begins issuing some kind of cryptocurrencies, it is more of a consumer protection matter, and most central banks have rightly said that it is very risky.
"Actually I do not recommend anyone who does not want to make a very risky investment be active in this field," he added.
Ministries have more positive attitude
Deputy Secretary General for Communications and State Information Systems Siim Sikkut of the Ministry of Economic Affairs and Infrastructure noted that one of the focuses of the e-Residency program is to broaden its portfolio of services as well as its business opportunities.
"The idea to offer an environment for ICOs essentially has merit," Sikkut said. "A decision has not yet been made regarding the issuing of estcoin, or Estonia's own cryptocurrency, specifically, but it is worth seriously considering the options described in Kaspar Korjus' article. We fully welcome the e-Residency team's initiative in holding discussions on this topic."
The Ministry of Finance did not wish to comment at length on the topic of estcoin, as the ministry found that this was the task of the e-Residency team as the ones who came up with the idea.
"One related topic, however, is blockchain technology more generally, which is a significantly broader matter," said Liisi Poll, head of public relations at the ministry. "The Ministry of Finance considers [this technology] prospective, and together with market players we are analyzing if and how the state could support its development, bearing in mind the interests of issuers and investors."
Editor: Aili Vahtla