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24th Oct 2021

Estonia to launch own virtual currency

  • Estonia will explore further the idea for a virtual currency - despite warnings from European Central bank chief Draghi (Photo: tofu_khai1980)

Estonia is planning to launch a virtual currency, the managing director of Estonia's e-residency programme, Kaspar Korjus, announced in a blog post on Tuesday (19 December).

He said that the Baltic nation is considering three different models for the digital currency, nicknamed 'estcoin'.

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"We are proceeding with estcoin not despite the criticism aimed at the proposal, but thanks to the criticism because it has enabled us to better understand how to proceed," wrote Korjus.

"All three of these models of estcoin are viable and can be introduced (even without alarming the European Central Bank)," he added.

The idea for estcoin was launched last August, as a so-called crypto token that would use the decentralised blockchain technology, which is also used for bitcoin, which has hit the headlines in recent weeks for its skyrocketing value.

Estcoin received criticism by, among others, the head of European Central Bank, Mario Draghi, who noted in September that "no member state can introduce its own currency".

Estonia is part of the eurozone and legally only allowed to have the euro as legal tender.

Korjus noted that Estonia "would never provide an alternative currency to the euro", but said that one of the three possible ways forward was an estcoin, available to Estonia's digital residents, pegged to the euro.

"Our e-residents are world citizens and the ability to conduct business globally with greater ease is one of the main drivers behind the growth of the programme," he wrote.

"Euro estcoins within the e-resident community could facilitate this exchange of value globally, while encouraging more business among e-residents and Estonians."

The other two options for estcoin Korjus mentioned were the 'community estcoin' and the 'identity estcoin'.

The first would be a way to reward volunteers that help improve Estonia's e-residency programme, while the second would be estcoins tied to a person's digital identity.

These could for example be used to pay for government services, but also, Korjus suggested, to pay fines.

Korjus acknowledged that, in a way, the estcoin is a solution looking for a problem.

"However, that is not necessarily a bad thing. E-residency was also a solution looking for a problem when the programme was launched."

"The solution was to enable anyone in the world to apply for an Estonian digital ID card and then gain access to our e-services, but even many of the first e-residents were not sure what problems this would solve for them," he said.

Digital nation

The small Baltic nation had set up its e-residency programme, which counts German chancellor Angela Merkel as one of its members, three years ago.

The country has used its six-month EU presidency, which ends on 31 December, to propagate its self-styled image as a pioneering digital nation.

The number of e-residents went from 20,258 at the start of its EU presidency to 27,600 two weeks ago (the most recent figure).

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