Estonia e-Residency scheme linked to growing digital currency fraud: report

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The e-Residency program in Estonia has been linked to several high profile cryptocurrency frauds, fueling concerns the scheme is being abused by criminals, according to reports.

According to the Financial Intelligence Unit of Estonia’s police force, overseas companies owned by e-residents of Estonia have been identified at the center of several large exit scams in digital currency in recent months, Bloomberg reported.

There is also the suggestion the system has been abused in connection with initial coin offering (ICO) scams, with fraudsters using the e-Residency program in order to set up fake companies in the country.

The news breaks just months after it was revealed that Estonia was at the forefront of a global money laundering scandal, with some $220 billion in illegal funds flowing through the country. This prompted regulators to suspend the licenses of 500 digital currency companies.

At present, only 353 digital currency companies in Estonia have been allowed to keep their licenses, down from 1,234 before the scandal broke.

The blow to the reputation of the e-Residency scheme is expected to take a further serious hit from the latest revelations, bringing the system into disrepute despite its noble intentions. According to Prime Minister Taavi Roivas, the e-Residency program was designed to encourage citizenship in Estonia as part of rebuilding efforts following half a century of Soviet rule.

First launched in 2014, the scheme allows anyone to become a digital citizen of Estonia, without necessarily living in the country. The scheme has proved popular, with over 70,000 e-residents already signed up to the program, including Tim Draper, Guy Kawasaki, Shinzo Abe and Angela Merkel.

The authorities behind the e-residency program are now working closely with law enforcement and intelligence officials to identify further abuses of the system, and to begin the job of rebuilding trust in the scheme.