Estonia Seeks Cryptocurrency Clarification

News and Analysis

The Supreme Court of Estonia has made a request addressed to local central bank, two government departments, the Bank of Estonia, and the country’s financial regulator, to clarify their views on legal stance of digital currencies in regard to AML policies and general essence of cryptocurrency and the underpinning technology thereof.

The entities, being the Bank of Estonia, the Ministry of Internal Affairs, the Ministry of Finance, and the Financial Supervision Directorate of Estonia are expected to provide their response to the request by or before January 11, 2016.

It should be reminded that several months earlier, the European Court of Justice, being the supreme court for the European Union, judged that cryptocurrency shall be treated as any other foreign currency. This ruling, as issued by a highest resort court, is mandatory for all member countries. Even though the ruling deals mostly with application of VAT to cryptocurrency operations (or, more precisely, with VAT exemption for digital currency), some courts of the EU members have issued their own rulings prior to issuance of the one in question. Some of those rulings directly contradict the judgement by the ECJ. Estonian court, for instance, ruled that bitcoin was not subject to any VAT exemption, and now the stance shall be brought in accordance with the ECJ ruling.

Estonia is well known for its contradictory policy when it comes to digital currencies and technologies. Recently it announced a partnership between Estonian e-government program and Bitnation, a platform acting as an independent virtual state which provides its virtual citizens with quite real notary services. On the other hand, last year, operator of a local trading platform justified its suspension with threats from Estonian law enforcement. This, if true, reminds of quite similar problems that cryptocurrency operator face in former Soviet republics like Russia or Ukraine. Soviet occupation might have left its mark even in Estonia, which joined the EU and NATO.

In Ukraine, law enforcement armed with illiterate court rulings apply severe pressure on digital entrepreneurs seeking for a bribe, while in Russia the government is going not only to ban cryptocurrency, but also to consider its usage a crime.

However, as long as the Estonian entities returned no reply, one may only wonder what it might be considering the inherent contradiction in local policies regarding digital currencies. Local bitcoin activists, in their turn, consider taking legal action in the European Court of Justice should the Supreme Court’s ruling seem unsatisfactory to them.

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