How to become a digital citizen

The Estonian Government has approved the concept of issuing digital IDs to non-residents allowing them to use a range of its online services, open bank accounts and start companies without having to physically visit the country.

“[It’s] an opportunity to create a new set of remotely usable global services,” said Siim Sikkut, an ICT policy adviser to the Estonian Government. “The aim is to make Estonia great - [for] at least 10 million people around the world [to] choose to associate with Estonia via e-identities.”

Estonians are able to perform nearly every public and private sector transaction in digital form, including signing any document. The idea of issuing digital IDs to foreigners was mooted seven years ago and last April the concept was approved by the Government.

“Today, it is difficult for a foreign investor to actively participate in the executive management of a company,” said Sikkut. “The non-resident ID card and digital signature would provide the necessary flexibility.

“[Also] there are entrepreneurs and investors both within and outside the European Union who are looking for opportunities to create their own company or investment vehicle in the EU. 

“The ability to incorporate and open a bank account – not just in Estonia, but in the EU – within a single day is only one of the services that Estonia can offer to holders of non-resident ID cards.

“Reinvested profit is tax-free in Estonia and the highly developed e-banking environment gives you immediate control of your assets from a distance. This means that Estonia has the potential to be attractive to entrepreneurs who need an investment vehicle and this would result in additional customers and capital for Estonian businesses.”

Companies with foreign ownership stakes are a key part of the Estonian economy; they account for 60 per cent of exports, 36 per cent of employment and 45 per cent of the value added in the economy.

Under the scheme, the country will target foreign investors, directors and employees as well as foreign scientists, educators and students. It is aiming for 10m e-residents by 2025 and believes that it can also double the number of companies in Estonia to 160,000.

E-residence will provide a unique opportunity to create a range of public and private services that are usable irrespective of location such as incorporation, bank transactions, tax reporting and cross-border medical services.

“[It] depends on what kind of services, and aimed at whom, we can come up with and provide,” noted Sikkut. “The state intends to create a platform for new business opportunities. The number of the users will depend directly on the question: can we – cooperating with the private sector – create the extra value or not?”

He pointed out that the European Union has passed an Electronic Identification and Trusted Services Directive (eIDAS). Soon, EU member states will be required to recognise the digital identity providers of all other EU states and allow them access to local digital services.

“But for most EU countries, a sufficiently secure e-ID is far away. Therefore, Estonian e-residence provides a good alternative for accessing the digital services of both the EU and Estonia, even for EU citizens.”

To start with, e-residents will have to apply for in Estonia itself, but it is hoped that by next year it will also be possible for them to verify their identity, apply for and receive the ID card from Estonian embassies and consulates abroad.

It is acknowledged that the initiative could attract money launderers and cybercriminals, but the Government said that safeguards will be put in place to combat abuse.

Sikkut added: “The development of the necessary infrastructure and range of services requires the coordination and joint effort of the public and private sectors.

“The aim must be ambitious; currently there are 1.3 million Estonians, but at least 10 million people around the world should connect themselves to Estonia via the digital identity. E-residence can make Estonia truly great.”

Sten Tamkivi, the former general manager of Skype, which was created in Estonia, who is now an entrepreneur in residence at venture capital firm Andreessen Horowitz, is excited about the idea.

“I sent a description of the plan to some well-known investors in Silicon Valley,” he told ZDNet.com.

“If the start-ups in their portfolio want to expand their business to Europe they can just step into the Estonian honorary consul’s office and become an e-resident of the European Union. The first reaction I got from one investor was: ‘This is so freaking huge, man, it’s insane’.”