Last week, the tiny Baltic nation of Estonia found itself at the heart of the cryptocurrency and ICO rumor mill. In a post on Medium, the managing director of Estonia’s e-Residency program, Kaspar Korjus, said that the country was considering the possibility of launching its very own ICO. The proposed token — tentatively named “Estcoin” — would be the first of its kind: A truly government-sponsored cryptocurrency.As often happens with these stories, however, the truth is a little less exciting than the hype. For a start, this isn’t an idea that is currently being given serious consideration by the Estonian government. As Korjus noted in his original post, “ This is not national policy yet, but it is an idea worth considering, which has the potential to become reality.”
At this point, there’s no reason to think that Estcoin is much more than an interesting idea. Then again, Estonia has spent the better part of a decade positioning itself as a tech-friendly hub for ecommerce operations within the EU. Hit hard by the financial crisis of 2008, the country has invested heavily in its technology infrastructure with the hopes of attracting talented, young businesses. In 2014, Estonia launched its “e-Residency program,” which — among other benefits — allows non-EU citizens to register and operate online businesses in the country, instantly gaining increased access to EU markets.
Estonia’s e-Residency program has been fairly successful, with over 22,000 e-Residents currently enrolled, and a long-term target of 10 million. Considering that Estonia itself only has around 1.3 million real-world citizens, it’s an ambitious plan to say the least. This willingness to experiment does suggest that Estonia’s government-sponsored ICO isn’t completely unrealistic or implausible.
While a fascinating idea, there are currently far more questions than answers about Estcoin. For instance, how much would an Estonian ICO be worth at launch? Where would it trade? Would it use an independent blockchain, or be built on Ethereum? Would it be regulated in some way? Could it be redeemed for regular EU currency at Estonian banks? Would it be a publicly funded venture, or would there be some kind of public-private partnership?
Most importantly, is Estonia’s government even willing to update their banking and finance laws to make the project feasible?
At the moment, Estcoin is best viewed as a hypothetical solution to one of Estonia’s larger economic issues. It’s a small country with a limited tax base. Raising money to fund government programs isn’t an easy thing to do. As Korjus recently told Motherboard:
“To be honest, there’s no way we [the government] can accept money. We don’t have bonds, and even if we did, they’re a low investment return. You can invest in our startups, and buy property, but you can’t invest in the government. And if we have huge fans that believe Estonia will succeed as a digital, borderless nation, they can now be financially connected to our economy.”
Of course, a properly structured, government-sponsored ICO could be game changer in the larger cryptocurrency world. If Estcoins were redeemable in some direct way — paying e-Residency fees and taxes, for instance — they would likely have substantial real-world value. Ethereum founder Vitalik Buterin has expressed interest in helping to develop the project, increasing investor confidence in the coin’s security and design.
Estcoin is a thrilling “maybe” of a development in the ICO world, but not one that’s ready to take center stage just yet. We’ll be following it as the story develops.