The Fintech Effect

Estonia wants to launch its own government-backed cryptocurrency called 'estcoin'

Key Points
  • Estonia has proposed to launch its own state-backed cryptocurrency, called "estcoin".
  • Ethereum founder Vitalik Buterin apparently gave feedback on the digital currency.
  • It would be launched via the digital coin community's version of crowdfunding - an initial coin offering (ICO).
Vyacheslav Prokofyev | TASS | Getty Images

Estonia wants to issue its own virtual currency with the help of Ethereum founder Vitalik Buterin.

The cryptocurrency, called "estcoin," could be launched via the digital coin community's version of crowdfunding – an initial coin offering (ICO).

ICOs enable start-ups to raise funds by selling off cryptocoins, such as bitcoin and ether, in return for cash. They are similar to initial public offerings (IPOs), but differ in that they deal with supporters of a project, making the investment more personal.

The small eastern European country is no stranger to digital innovation. It was the first country to offer citizens of the world "e-residency," a digital ID for non-Estonians that offers access to services like banking, payment processing and taxation.

Kaspar Korjus, managing director at e-Residency, Enterprise Estonia, said that the initiative was about creating a "borderless digital nation".

"A government-supported ICO would give more people a bigger stake in the future of our country and provide not just investment, but also more expertise and ideas to help us grow exponentially," Korjus said in a blog post on Monday.

Ethereum founder provided estcoin feedback

Vitalik Buterin, who founded the blockchain network Ethereum in 2014, is a keen backer of Estonia's digital innovations and has provided feedback on its estcoin proposal, Korjus said.

Vitalik Buterin, founder of ethereum
Getty Images

"An ICO within the e-residency ecosystem would create a strong incentive alignment between e-residents and this fund, and beyond the economic aspect makes the e-residents feel like more of a community since there are more things they can do together," Buterin said.

"Additionally if these estcoins are issued on top of a blockchain (they could possibly be issued in multiple formats at the same time, nothing wrong with this) then it would become easy and convenient to use them inside of smart contracts and other applications," Buterin said in his blog post.

Blockchains are distributed ledgers that serve as the foundation for digital coin transactions.

According to Korjus, more than 22,000 "e-residents" from 138 countries have signed up to the initiative, and make "an enormous contribution" to the Estonian economy.

Estonia 'the only truly digital society'

Last month Estonian President Kersti Kaljulaid said that her nation was "the only truly digital society," underpinned by the state.

"Almost all our citizens' interactions with the government, including voting, can be done securely online, and our 'e-residents' can incorporate and run their businesses in Estonia without ever having to set foot here," she said in an article for the Telegraph.

"Seeing this digital revolution up close has made me question whether the state as we know it today is fit for the 21st century."

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