In less than 10 years, Estonia went from being the most impoverished country in the Eurozone to be a growing economy, also thanks to cryptocurrencies.
In 2011, Estonia held a very dubious Eurozone record: it was the poorest country. At that time, the state had just joined the Union, and its people were struggling to spur economic development. Less than 10 years later, it’s safe to assume that Estonia is a booming economy (not only within the EU) also thanks to cryptocurrencies.
The number of startups incorporated in the Baltic nation is fastly growing. A friendly business environment, low taxation, a progressive community and free wireless on almost every street allow entrepreneurs to start their business there effortlessly.
When it comes to cryptocurrency, it must be noted that the Estonian government didn’t embrace Bitcoin and altcoins until early 2017. But now crypto-transactions aren’t subject to VAT; digital assets are classified as property for tax purpose; cryptocurrency exchanges are fairly regulated; ICOs must comply with a handful of requirements in the country.
Many cryptocurrency companies are registered in Estonia and run their businesses from there. Hashflare, a famous cloud mining company, started its operation from Tallinn (before moving its offices to Scotland;) Mothership and HashCoins are popular startups registered in the country, Noku launched its exchange services from Tallinn.
It is significant that Taavi Rõivas became an advisor to the blockchain startup Lympo in September 2018. Mr Rõivas ran the Estonian government as prime minister from 2014 to 2016 and serves as a Member of the Parliament. At the time of his appointment, Mr Rõivas said that he was “excited to help one of the most promising Baltic startups to grow and pursue the mission of motivating people to exercise more and better.”
Dealing with the Regulators
Everyone is aware that one of the most challenging constraint blockchain startups face concern to the relationship with Regulators. In Estonia, the watchdog Finantsinspektsioon (EFSA) and the Financial Intelligence Unit (FIU) are approachable, instead. They cooperate with founders in an easygoing, friendly and reliable way. If you follow the (straight and bright) rules, Estonian regulators are ready to help you.
Estonia grants two types of license, to offer digital asset exchange platforms and wallet provider services from the country. FIU, an independent structural unit of the Estonian Police and Border Guard Board, already granted more than 1,000 licenses. Of course, crypto-businesses registered in the country may legally operate in the entire EU, of which Estonia is a member state, and licensees are obliged to comply with relevant local and European laws, in terms of anti-money laundering and counter terrorist financing.
Tax policy and operational cost
We already wrote about the Estonian tax system. It is very easy to say that the country offers one of the most competitive tax policy in Europe.
Further, the low cost of starting and running a business in the Baltic republic cannot be forgotten.
The Doing Business rank, developed by the World Bank Group, assigns to Estonia 80.50 points in the Ease of Doing Business Score. The country is in 16th in the world. With just 8 payments per year, Estonian is rated 14th in the Paying Taxes rank (Switzerland is 20th.)
The flip side
Much like other countries where authorities have been trying to create a crypto-friendly environment, traditional financial institutions in Estonia are still to respond to the needs of the nascent industry.
The major hurdle for Estonian FinTech companies is restricted access to regular banking services.
Fortunately, Estonian companies are allowed to keep their bank accounts abroad, and many crypto-businesses exploit this chance.
Further, Riigikogu, the national Parliament, recently passed an amendment to the Commercial Code and removed the requirement that private companies limited by shares must use an Estonian bank account when paying in their share capital. Starting from January 2019, they can use a “credit or payment institution in the European Economic Area” for this, instead.