Exclusive: Estonia’s PM firmly rejects Bitcoin, despite fierce lobby from Coinbase and crypto industry
Estonia is widely considered to be one of the most likely contenders to regulate crypto in the EU first.
After all, welcoming Bitcoin and other virtual currencies into its payment infrastructure would fit in nicely with Estonia’s ambitious digital agenda and its much-talked about e-residency program.
However, the country’s prime minister – Kaja Kallas – crushed any crypto illusions or Bitcoin expectations as she told City PM in an exclusive 2-part sit-down at her official residence in Tallinn that Estonia will not throw open the door for cryptocurrencies.
The competition lawyer and former member of the European Parliament, who has only been prime minister since January of this year, is clearly not a Bitcoin believer.
“I know one of my predecessors was a big proponent of crypto but I am very cautious,” Kallas said.
So there is no chance Estonia will soon follow El Salvador and make Bitcoin legal ender? “Ha! How is that going by the way?” she laughed.
“What I see in El Salvador is not going that well, to my understanding.”
The tiny EU member state is under enormous pressure to regulate the virtual currencies, however, as Kallas revealed many key players in the crypto industry lobbied her during a recent visit to the US, earlier this summer.
“Coinbase, and those big Bitcoin and big currency companies approached me, urging me, ‘make it legal in Estonia’, but I am a bit reluctant to be positive about this,’ she said.
Cyberattacks and ransomware are the primary reasons not to embrace crypto at this stage, Kallas explained.
“We are sensitive to these issues, and the cryptocurrency, how it is used, it’s a big problem, because you see the cyberattacks and how easily companies are paying out [ransom] money.”
“And they are already providing insurances [while] the bad guys know this, it’s easy money which makes this will to attack and to get this easy [Crypto] money even more tempting.”
“I am very much afraid where it could lead to. The good guys don’t share the info about the cyber attacks because they are embarrassed. We have to share the experiences so the others are not attacked,” Kallas stressed.
Brexit boost
Another topic Kallas discussed with City PM was the UK’s departure from the EU, which has led to around 4,000 UK companies setting up shop in Estonia, mostly by registering for the country’s much-talked about e-residency scheme.
Kallas shared that her country is benefitting hugely from Britain’s departure from the European Union.
“When the United Kingdom decided to leave the European Union, many British friends took up our e-residency services,” she said.
“It clearly increased after Brexit, even before actually, even when the vote happened, we saw a spike.”
“We have seen more than 4,000 British companies coming to Estonia,” Kallas continued, explaining that the UK companies’ main reasons were access to the EU, the country’s tax system, as well as Estonia’s flourishing tech scene and digital infrastructure.
The arrival of UK companies has partly contributed to a 60 per cent jump in tax revenues this year so far, compared to the same period in 2020.
“We have gained an additional €51m in tax, it may not be a big number for you, but we are a small country,” Kallas concluded.
Kallas went on to say that her and previous governments have tried to make conditions as favourable as possible for “our British friends,” primarily by offering a wide range of digital services.
“99 per cent of companies were established online, it takes under 20 minutes to set up a company in Estonia, and to start operating,” she explained.
Moreover, companies pay zero per cent corporate income tax if they reinvest in their company, “if you take dividend you pay tax but if you re-invest, there is no tax,” the prime minister continued.
That [zero tax regime] is the fight we are currently having with the OECD and the G7
Kallas
“What I don’t understand is that not all countries take up our system, it’s the most competitive system out there,” she concluded.
Part 1 of City PM’s sit-down with Kallas, which zoomed in on the country’s e-residency program and innovation, can be found here.