The e-residency program of Estonia is now under the local regulator’s radar as foreigners registered as e-residents of the Baltic nation are being linked to cryptocurrency frauds.
The local police’s Financial Intelligence Unit has discovered that overseas companies owned by e-residents of Estonia have been involved in multiple large-scale exit scams.
Regulators also suspect that Estonian firms and e-residents were involved in organizing initial coin offering scams, according to the police report cited by Bloomberg.
This comes only three months after the crypto-friendly nation became the epicenter of a $220 billion money laundering scandal. Estonian regulators immediately revoked the licenses of more than 500 crypto companies as a response to the scam. Today, only 353 companies own a crypto license in Estonia while 1,234 companies did so at the end of 2019.
While the scandal had already caused enough damage to Estonia’s digitization endeavors, the involvement of its e-residents in crypto scams is expected to worsen its reputation.
Former Estonian Prime Minister Taavi Roivas has previously told Cointelegraph that the e-residency program was one of the measures to help the country effectively reboot from 50 years of Soviet occupation. He had said that digitizing things rather than relying on paper files was a logical start and that was where the idea of e-residency stemmed from.
The government launched the program in 2014 to offer Estonian citizenship to anyone irrespective of where they were actually located.
Following the launch, the British senior editor at the Economist, Edward Lucas, became the first e-resident of Estonia. Many other well-known names from across the world followed suit, including venture capitalists such as Tim Draper, Guy Kawasaki and Ben Horowitz. Japan’s former prime minister Shinzo Abe and the German Chancellor Angela Merkel also later became e-residents of the country. So far, there are close to 70,000 Estonian e-residents.
The e-residency team is now working together with the police and the Financial Intelligence Unit to unravel the case and win back trust in the e-residency system.