Digital Estonians: E-residency as the way of the future | News | DW | 07.08.2015
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Digital Estonians: E-residency as the way of the future

Estonia has managed to live up to its declared intent of pioneering the first borderless digital society. Its e-residency program has proved to be a success half a year after its conception.

The values of nationality and statehood may be fading in this virtual age, when a growing number of digital nomads have come to define their identities by the nature of their transnational mobility rather than by citizenship and its associations. E-commerce is booming, online startups are abounding, and globalization is playing itself out on the digital highways of the planet; on the flip side, cybercrime is also moving to the forefront of identity theft.

It is in this spirit, perhaps, that the Baltic state of Estonia launched the world's first and only e-residency program at the end of last year. For a fee of 50 euros ($54), you can apply to become a virtual entity with access to many of the same daily services Estonia's regular residents have. You can open a bank account or register a company or simply have a digital signature to verify your identity online. The dream of being in two places at once has finally become a (virtual) reality.

Estonia offers 4,000 services to be accessed online, though many of these (such as voting) apply to citizens only. The small state is slowly challenging what it means to belong anywhere while decidedly positioning itself as a key gateway to the European Union with the pilot project.

In a promotional article posted in January at e-estonia.com, the program's website, project manager Kaspar Korjus said e-residency opened up many possibilities for international entrepreneurs who would otherwise need to leave their homelands to start functioning businesses. Korjus said he received many applications from countries with insufficient digital services, such as access to PayPal, and it appeared that people regarded Estonia's e-residency as the only way to fully function in the modern age of digital services. He said, for example, that he had received many inquiries from neighboring Russia, where the red tape associated with setting up a new legal entity, or even just a PayPal account, is reportedly stifling.

fuzzy electronic text

Estonia hopes to create the world's largest digital residency program, challenging the very idea of nationhood

Korjus added that e-residency was also attractive to people who wanted to establish a base in the European Union without having to fork out major overhead costs. In fact, you never even have to enter the small Baltic state in your lifetime to be part of the initiative, as you can now obtain your e-residency card at 38 Estonian embassies worldwide. Many applicants do, however, tend to have a previous relationship with Estonia.

"We created e-residency to grow the digital economy, attract new investment, and connect with new businesses," Korjus said in a press release. "E-residency provides enormous advantages in convenience and flexibility for anyone who has an existing business or other connection to Estonia. But it also provides anyone, not just those connected to Estonia, with the tools and systems to own and operate their own business.”

'A new way'

One of the beneficiaries of the initiative is Tallinn-based Investly, a crowd-financing platform for small businesses. CEO Siim Maivel told DW that since the introduction of e-residency, conducting business has become much easier for his venture.

"E-residency has made things a lot easier with big investors," Maivel said. "You become completely independent from your physical location," he added. "A lot of startups are already working remotely in this way, with teams being based across continents. E-residency goes along the same lines. You can start your legal entity in Estonia and use the tax and banking systems here but work completely elsewhere. It's a new way of looking at things."

The scheme has also attracted criticism and been disparaged as a PR stunt to publicize the former Soviet republic's changing image. Critics also fail to see the point of digital residency if it's not linked to any level of physical residency benefits and have expressed worry about privacy issues as the Estonian government ends up holding so much data about its e-residents.

In the promotional text, Kaspar Korjus said the risk of abuse is kept at bay by treating the initiative as a "work in progress."

"We are taking careful steps and undergoing a proper risk analysis both in the government and the financial sector," he said. "Only then can the Estonian government sign off on the project."

Though the application procedure involves a small background check, there are few to no safeguards, which bears considering, especially after Estonia fell victim to a series of cyberattacks from Russia in 2007 and 2008. However, Siim Maivel still believes that the benefits outweigh the risks.

"I think e-residency is something quite unique," Maivel told DW. "It presents an entire nation, an entire government, as a startup. And this sends a clear message to foreigners and investors that we are taking one big step forward into the future while other countries are still lagging behind."

Almost 4,000 applications in seven months

The Economic Affairs Ministry recently announced that applications were booming. While the goal was originally set at 2,000 applications by the end of 2015, Estonia had received almost double that number of applications from 73 countries by the end of July.

The ministry expects a 60-million-euro cash injection into Estonia's economy by the time it has 30,000 e-residents and hopes to have as many as 60,000 e-residents by the end of 2017. The ultimate goal is set at 10 million e-residents by 2025 - nearly 10 times the number of its current number of citizens, and a potentially massive push for the economy.

Estonia might need that boost: The Baltic economies have not yet fully recovered from the recent global downturn. Although Estonia has the lowest public debt levels in the EU (10.5 percent), and continues to get respectable credit ratings across the board, officials consider the nation too poor to support international loans to Greece or host its portion of the 40,000 migrants currently awaiting settlement across the EU. Estonia seems to prefer to keep its visitors virtual.

A digital society

After Estonia's independence from the Soviet Union in 1991, banking and government services had to be built up almost from scratch - and electronic solutions were often the cheapest. Only half of households in the country had a phone line in 1991, but today Estonians proudly vote and file their taxes via the Internet. Paper has been banished from Cabinet meetings, and ministers sign off on bills with their iPads and laptops.

Korjus believes that Estonia is setting an example for the rest of the world to follow.

"We are helping the whole world - the payment provider in the US, the entrepreneur in Asia, the banker in Europe," he said in the promotional text. "The benefits are long-term. If you believe that a country would gain from having a lot of fans all over the world, then you should believe in e-residency."

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