Why Estonia

The country of Estonia is a developed country with an advanced, high-income economy that has been among the fastest-growing in the EU. Estonia ranks very high in the Human Development Index, and performs favourably in measurements of economic freedom, civil liberties, education, and press freedom (third in the world in 2012 and 2007).

Estonian citizens are provided with universal health care, free education, and the longest-paid maternity leave in the OECD. One of the world's most digitally advanced societies, in 2005 Estonia became the first country to hold elections over the Internet, and in 2014 the first country to provide e-residency.

The Estonian government has been testing blockchain technology since 2008. Since 2012, KSI Blockchain technology, developed by Estonian-based company Guardtime, has been in production use to protect Estonian governmental data registries such as the national health, judicial and legislative systems, with plans to extend its use to other spheres such as personal medicine, cybersecurity and data embassies. Incidentally, KSI is used by NATO and the US Department of Defense.

Nearly every one of the country's 1.3 million citizens has a state-issued digital identity and an ID card, which functions as much more than simply a driver's licence or passport. This eID uses a public key encryption and allows a person to be verified in an online environment. This is what allows a person digital access to things such as the voting system or the ability to fill a pharmaceutical prescription.

Estonia has already enacted specific anti-money laundering (AML)/counter-financing of terrorism (CFT) regulations applicable to services related to cryptocurrencies (custodian wallet service and exchange service), as from November 27, 2017. Thus, Estonia is the first EU member state to follow the approach of the draft Fifth EU Anti-Money Laundering Directive (5AMLD).

Cryptocurrency regulation

Cryptocurrencies do not possess a legal status of currency or money, but they can be accepted by natural and legal persons, as a means of exchange or payment. Estonia is the first EU country to provide clear regulation of cryptocurrencies, cryptocurrency exchanges and custodian wallet service providers for AML/CFT purposes.

The definition and legal nature of cryptocurrencies (i.e., are they a right, thing or private money) in the civil law is unsettled, and there is no case-law on the subject in Estonia.