The European Union country of Estonia is considering issuing a cryptocurrency to help raise money for the nation of 1.3 million people.
It’s just an idea at the moment, floated in an article on Medium.com by Kaspar Korjus, managing director at e-Residency, a programme which allows people from any part of the world to become a sort of “virtual citizen” of Estonia.
One of the advantages of becoming an e-resident is that it enables someone to set up a business in the EU as though they were an Estonian citizen, even though they may never have even visited Estonia.
And although it’s just an idea, if the 151st largest nation in the world does go ahead and issue a cryptocurrency – given the working name of “estcoin” – it will be the first country to do so officially.
So far, all other nations have officially been wary of cryptocurrencies because they are based on a fundamentally different system.
National currencies are based on the financial infrastructure of a country which crucially includes a central bank.
Cryptocurrencies, however, do not require a central bank as they are based on a computer record of the transaction kept in what’s called the public ledger using what’s called blockchain.
So, theoretically, blockchain could undermine the central banking system and the currencies it supports, which is why governments are wary of it.
That’s not to say that governments and traditional financial institutions have been hostile to blockchain and cryptocurrencies, or digital currencies as they are sometimes called.
In fact, many are studying the technology and developing ways to incorporate it into the existing financial infrastructure.
Some banks have already started adopting it, while a few governments have introduced regulations which formally deal with blockchain and digital currencies.
The vast majority, however, remain wary. And in some countries, digital currencies are illegal.
South Africa’s central bank, for example, is the latest to reject the idea of launching a cryptocurrency, saying it’s “too risky”.
Francois Groepe, deputy governor of the South African Reserve Bank, acknowledges the increasing popularity of cryptocurrencies, but adds that more consideration is required.
As reported on ITWeb.co.za, Groepe says: “Virtual currencies have the potential of becoming widely adopted.
“However, for the central bank to issue virtual currencies or cryptocurrencies in an open system will be too risky for us. This is something we really need to think about.”