Estonia, a world leader in e-services innovation, including the creation of Skype and Transferwise, is now thinking of a new “first”: that of “Estcoin”, a bitcoin-like digital currency that will put the euro on blockchain mode.
The initial proposal launched by Kaspar Korjus, the executive director of the government’s digital identity program, “e-Residence”, was already torpedoed by the head of the European Central Bank (ECB) Mario Draghi last August, with the ban on eurozone countries to issue cryptocurrencies.
Korjus has since presented a new proposal, with three models of estcoin, a digital token that “does not necessarily fall” in the category of cryptocurrencies and which could be introduced “without violating the rules of the ECB”. All three models use blockchain technology, a method of transmitting anonymous and tamper-proof information, launched in 2009 that has enabled the emergence of crypto-currencies, including bitcoin, and peer-to-peer payments.
Blockchain experts believe that Korjus’s Bitcoin style currency could pave the way for the Euro to be used on platforms based on this technology. According to Korjus, estcoin would be used exclusively as part of the digital identity card program, the e-Residence, launched by Tallinn in 2014.
The latter, presented as offering a “transnational digital identity granted by a government”, allows businessmen from all over the world to found a company in the EU and manage it remotely, paying taxes and digitally signing the necessary documents. So far nearly 28,000 international customers, including 4,271 companies, have obtained e-Residence in Estonia.
In addition to estCoin, the other models on offer are Community Flag and Identity Check. The first would be awarded to members of the Estonian e-residence to reward them for their contribution. The second would be attached to the person benefiting from the e-identity to enable him to use it for different activities within the Estonian digital society. Their value would depend on their usefulness in terms of blockchain.
Korjus in statement said that instead of creating an alternative to the euro or a new cryptocurrency, estcoin would simply allow any member of the Estonian e-resident community to use the digital version of the euro on the blockchain network. It would be a world first.
“Banks could put and withdraw funds in euro stubs, but transactions could occur independently of them, via the blockchain,” he says. “This means that community-based exchange of values could take place for free on a global scale — all that is needed is a digital portfolio and the government’s commitment to buy back each estcoin for euro,” says the official on his official blog.
It would be “a new way of presenting a currency, but not a new currency in itself,” said Xen Baynham-Herd, Blockchain’s chief strategist and economist, who self-defines as “the world’s first software platform for digital values.” He compares estcoin to a “settlement unit”, a prototype of digital currency he had developed during his previous position at the Swiss bank UBS. Six of the world’s leading private banks contributed to the latter project, according to the Financial Times.
This prototype, explains Baynham-Herd to journalists, is a “blockchain-driven token, based on the cash reserves held by the central bank or the commercial bank, which corresponds exactly to what estcoin would be for the euro”.
The Estonian token “is simply a new way of representing existing reserves in euros, the exchange would be one against one, there would be no creation of new money”. “It would be a digital form of digital currency denominated in euros that could become the basis for many other financial instruments and transactions that require fast and cheap transactions on the blockchain,” said Baynham-Herd.