Can the UK compete with the Baltics when it comes to crypto?
Sibcoin Foundation’s head, Alexander Novozhenov, analyses the state of cryptocurrency in the Baltics and explains why he thinks they are leading the way in building digital economies.
2017 could rightly be called the ‘Year of Cryptocurrency’. Blockchain startups collected an incredible amount of money in record time, and investors of successful ICOs earned thousands of per cent after listing on cryptocurrency exchanges.
Despite an ongoing market correction, excitement around crypto startups has persisted. Investors continue to look for the next ‘Crypto Holy Grail’, and startups are consistently generating ideas and launching new projects in the digital economy.
A few key countries have started developing more accommodating legal frameworks for cryptocurrencies, whereas others remain rigid. Due to low operating costs, the Baltic countries stand out from other European countries as the location of choice for startup founders.
More and more ICO projects today choose Estonia as a jurisdiction and the main base. The loyalty and friendliness to the startup ecosystem as a whole, including an adequate tax base, simplified set-up and reporting processes, and e-citizenship for hiring the best global talent – all greatly facilitates the life of potential crypto-entrepreneurs. But, more importantly, foreigners can set up a company and conduct business in Estonia enjoying the same terms as local entrepreneurs.
At the same time, Estonia is a country with relatively soft regulations towards the crypto market. Everything that ICO needs is to get a specialised license, which is quick and easy. In fact, this is probably the first step towards the regulation of the crypto market, as right afterwards a crypto startup is given the complete freedom.
Estonia has a great interest towards “digital economy” and at some point it was planning to launch its own national cryptocurrency. However, the European Central Bank banned the “national ICO”, and Estonia backed down, acknowledging that there are other possibilities to explore that cryptocurrencies can give.
Lithuania is also very friendly towards innovative companies. Lithuania, and its capital Vilnius in particular, has been carefully tending to its digital economy for several years, becoming one of the first countries in Europe to adopt cryptocurrency legislation, and has managed to create favourable conditions for crypto startups. In 2018 alone, Lithuanian ICOs have already raised more than $250m.
Lithuania is in the Eurozone and benefits from access to European markets, legislation that makes opening a business easy and straightforward, and the fastest internet speeds in Europe. Vilnius is host to one of the first blockchain centres worldwide.
Latvia, in turn, is also in the Baltic race for welcoming FinTech companies from across the world. Many ICOs currently prefer the framework and jurisdiction in Estonia or Lithuania, but there are some noteworthy crypto projects in Latvia. Crassula offers blockchain solutions for merchant retailers, online banking and crypto payments.
It is worth noting that Bitfury grew from a Latvian base to set up offices worldwide. Latvia’s plans are ambitious – to create state tax compensation schemes for qualified employees, startup visa programs, and other advantages for entrepreneurs settling in the country.
In November 2017, the Finance Ministers for Estonia, Latvia, and Lithuania signed a Memorandum of Understanding, creating a pan-Baltic capital market. The agreement is designed to strengthen investment between the nations, create consistent employment opportunities, and increase the financial power of these three relatively small nations.
Joint regulation of the ICO market in the Baltic countries, and a general absence of borders, should develop cooperation between nations, as well as incentivise the development of new blockchain and cryptocurrency technology to be used around the world. A unified approach will also prevent fraud and low quality projects, carefully growing a new market that is, currently, largely unregulated.
Many countries have begun to understand how promising blockchain and crypto innovations can be. The regions most eager to adapt will become leaders in the digital economy, and receive the greatest benefits. Currently, Lithuania, Latvia and Estonia are quietly leading, adapting more rapidly than their larger neighbours.