An eastern European country which made history by introducing the first ever virtual residency has revealed that it will move forward with plans for creating its own version of bitcoin.
Estonia was the first country to seriously float the idea of its own cryptocurreny or digital token, called Estcoin, in what's known as an initial coin offering (ICO) earlier this year and the government sought feedback.
It has now narrowed its focus down to making Estcoin a "crypto-token" that would encourage more people to become e-residents and encourage companies to set up there, noting that a government-backed currency would conflict with its official currency.
"Much of the criticism of estcoin was based on the fact that Estonia simply can’t start its own cryptocurrency even if it wanted to," wrote Kaspar Korjus, managing director of the country's e-residency programme, in a blog post.
"Estonia’s only currency is the euro and this is an essential feature of our EU membership, which we are proud to have. No one here is interested in changing that. That’s why we have always referred to estcoin as a proposed "crypto token'."
And the country wants to become a global centre for "trusted" ICOs, which this year have attracted more than $4bn globally according to new research, while applications for Estonian e-residency spiked on the back of ICO interest, Korjus revealed.
He suggested that the country's e-residency could provide a crucial element of trust to the ICO process.
"The e-Residency programme is keen to support responsible ICOs. Although we would obviously never ‘back’ an organisation’s ICO, we can encourage ICOs launching through e-Residency to follow a strict set of best practises outlined in our guidelines in order to provide a higher level of trust and transparency to investors."
Three viable ways estcoin could work have been identified, with one or more coming to fruition.
A community estcoin would be used as reward for those who are involved in the e-residency community. "For example, e-residents should be able to earn estcoins if they drive web traffic to e-Residency, successfully sign up a new e-resident, post a tender within our community that provides work to another e-resident or Estonian company, or spend time providing useful advice to other e-residents," he explained.
An identity Estcoin would tokenise digital identities, effectively like smart contracts, using the tokens to perform e-residency functions such as signing documents.
"E-residents would receive a certain amount of tokens that are personal and attached to their digital identity and can then purchase more when required. This would not raise any revenue for Estonia, but merely contribute to the maintenance of the network. In fact, everyone would save money as a result of this proposal," said Korjus.
And a third option would be pegged to the euro.
"We would never provide an alternative currency to the euro, but it’s possible that we could combine some of the decentralised advantages of crypto with the stability and trust of fiat currency and then limit its use within the e-resident community," said Korjus.
Venezuela is likely to pip Estonia to the post as the first country to launch a government-backed cryptocurrency with plans for the Petro underway.
Estonia will continue working on the proposals for Estcoin, seeking further feedback and with further updates promised in the new year. "Crypto tokenisation will alter the nature of our world whether we act or not, so we must ensure we are taking a lead and that is already happening in Estonia," concluded Korjus.