BTC.ee owner alleges threats by Estonian police and moves business out of the country as Supreme Court of the country on Monday ruled against Bitcoin in a landmark case.
BTC.ee recently announced closure over threats by the Estonian police. The website had an ominous notice posted on it about the closure stating, “Apparently the Estonian police can re-interpret the law, keep their interpretation secret, and apply it retroactively and arbitrarily. Unfortunately the courts in Estonia do not appear to see a problem with that.”
Supreme Court rejected the claim by de Voogd that his activity could in no way be linked with Estonia as the portal was not located in Estonian servers. Also irrelevant in the opinion of the court was the fact that Bitcoin was created much later than Estonian laws treating the “alternative means of payment”.
Intelligence asked owner to give info on customers
It all began in March 2014, when Dutch citizen resident in Estonia, Otto Albert de Voogd launched BTC.ee, a web based service that helped people buy and sell Bitcoin.
However, over the course of time the Estonian Financial Intelligence Unit (FIU) became interested in the operations of de Voogd’s bitcoin exchange service and asked him several oral and written questions.
FIU asked to be given information on BTC.ee customers: their bank account numbers and the destination of where the money was being sent.
The Postimees Estonian News reports that Otto Albert decided to contest the FIU’s competence to supervise Bitcoin transactions. We asked Otto Albert de Voogd of BTC.ee about exactly what happened and he said:
“Back in February 2014 I received a threatening e-mail from Estonian policeman Urmas Pai, that suggested they could start a criminal investigation against me. Subsequently he demanded that I provide them with information. I was not inclined to cooperate with an investigation against myself, so I declined to answer. I was told that if I did not answer I should file an appeal to the courts, which I did. The Supreme Court now ruled that I do not have the right to silence (similar to the US 5th amendment), because in their words, the risk of self-incrimination is either "distant" or "theoretical". I obviously disagree with that.”
Otto de Voogd: Estonia Violated AML Laws
Otto is of the view that Estonia has violated EU Anti Money Laundering (AML) laws by unilaterally extending the EU AML law without giving a proper justification and registering the extension of the law with the EU.
He argues that proper procedures were not followed in enforcement of the law. He also says that he is ‘irked’ by the fact that Estonian police did not reveal its interpretation of the law till they contacted him. Instead of making their position clear, he says, the police went on to look for people “to make an example off (sic)”.
Ray Youssef, CEO at Paxful Inc, a company that operated from Estonia, doesn’t agree with de Voogd’s stand. “We don't have a crystal ball but this usually happens when businesses have a standoffish attitude towards the police, - says Youssef. - The police then take measures to enforce their right to police the situation, especially in such a small state like Estonia. We at Paxful left New York State for Estonian when the Bit License essentially out lawed a bitcoin startup's agility. We at Paxful have zero tolerance for anything that would stifle innovation and we can say with confidence that we feel safe operating in Estonia.”
Estonia wants to extend its Bitcoin policy EU-wide
What effect the regulation of Bitcoin by Estonia will have on the cryptocurrency in Estonia is also a matter of perspective and interpretation, depending on who you ask.
According to Otto de Voogd, restrictions imposed by Estonia mean that customers that trade more than 1,000 Euros worth of Bitcoins should be met literally face-to-face by representatives of exchanges and other parties involved.
De Voogd adds that the Estonian government had been aware of issues surrounding Bitcoin for more than two years but has chosen to do nothing to change the situation.
Estonia imposed Value Added Tax (VAT) on the entire value of a Bitcoin transaction. De Voogd is of the view that the country’s arguments in European Court of Justice (ECJ) for extension of this policy EU-wide is a huge setback for Bitcoin in the EU.
However, the ECJ has ruled otherwise.
To Regulate or Not to Regulate - That is the question
There are obvious differences among individuals as well as companies when it comes to regulations and their utility. It is also a matter of debate as to who should regulate what.
Europe is a unique case because there are national and supranational laws as well as regulators and decision making bodies.
Interestingly, the Estonian Supreme Court decision can be seen as a landmark case because the court ruled that even if the servers were not located in their jurisdiction, the regulators have sufficient grounds to intervene. The operations of Otto’s business were located in Estonia, collected money in cash from Estonia and had been specifically created for an Estonian clientele.
While preventing money laundering is an obvious concern of any state, overreach by the establishment is also a valid concern. However not everyone thinks that this is an extreme decision by the court.
Ray Youssef says, “Within Estonia this will have little effect as this legislation was, by all indicators, passed to protect the police from legal liability in ending what they saw as a unworkable situation. Bitcoin itself was never the issue in this case. The spirit of this law and the details surrounding it will certainly be lost on EU officials and it may very well be used by other politicians within the EU as precedent to suppress bitcoin as a whole.”
As for Otto de Voogd, we asked him if he would take this matter to the EU courts and he had this to say, “If I can, I will take it up with the European Court of Human Rights, I am also considering to file a complaint at the European Commission.”