Could e-residency offer a way around Brexit?

Could Estonia's e-residency program offer a way out of Britain's Brexit bind? Kaspar Korjus, director of the country's program thinks that digital nomadism could be the way forward for Britons and British companies.

Deutsche Welle, 25 Sep 2016

Since the referendum result in the UK and the impending Brexit, there’s been a rush of Britons trying to obtain residency within other EU countries so as to remain part of the EU. But the strict criteria often prevents many of them qualifying for an easy route. Now though, the Republic of Estonia might offer a way out of that bind. It has been offering e-residency permits for a couple of years as part of a wider program of e-government. This summer the country saw a jump in the number of Britons applying so they, or their companies, could continue trading as EU entities. DW talked to Kaspar Korjus, Estonia's e-residency program director.

Deutsche Welle: What exactly is e-residency?

Kaspar Korjus: E-residency in the larger context is the new nation state; we are building a whole new digital nation for global citizens. That means that every person on this planet can become an e-resident of this nation. By becoming an e-resident each person gets a digital identity, contained in a smart ID card. Once you get a smart ID card you can log in to the nation state services, you can digitally sign everything and you can be part of this new community.

Estonia has 13,000 e-residents currently
and hopes for 10 million by 2025

Why did Estonia decide to adopt this method? It's not just e-residency, but the whole thing is part of a wider program E-government.

Yes, so E-government has been in Estonia for the last 15 or so years. All Estonians have been voting on line, declaring taxes, getting e-prescriptions, signing all contracts, establishing companies; everything is done using that digital identity. Now we've just opened the borders to everyone else, so that everyone can be part of this.

The reasons are twofold: firstly, it's purely economic, so that Estonia can be bigger. Estonia has a population of just 1.3 million and the internal market compared to Germany for example is so small that we just need more customers outside of Estonia. Secondly, it doesn't add too much cost for us to open these things.

There are billions of people today all around the world who lack access to financial services or lack access to proper business services. For us to open these gates to them, it just doesn't cost us much extra. We already have the legal system, we already have the infrastructure and we already have the services, so we can just offer the same services to them also.

How many e-residents do you have at the moment?

KK: We have over 13,000 e-residents today, and we are still in a beta phase. To become an e-resident each person needs to pay 100 euros and apply online at e-resident.gov.ee and then have one face-to-face meeting at the Estonian embassy. This takes approximately two months and then a person could become an e-resident and access all the services.

Did you see the numbers shoot up after the referendum in Britain because of the threat of Brexit?

That's true, a few days after the Brexit referendum we had a ten times increase in applications from the UK. They were mainly from the start-up and entrepreneurship world. Many start-uppers were afraid of what Brexit could bring, whether they'd still be able to work with EU companies, whether they'd still be able to have employees from the EU. E-residency in that sense allows them and helps them to still run EU-based companies whilst living in the UK.

Britons can live in the UK and work
with companies in the EU via Estonian
e-residency and services

Because essentially it gives them EU membership?

It gives them an EU company, an EU bank account and EU regulations. So you don't need to apply to each separate EU country for a set of regulations as you would have the Estonian EU entity. Through that entity, you can sell all your services and regulations apply there. That means that none of the Brexit people need to move from the UK to Europe to deal with EU businesses, because they can stay living in the UK and deal with the EU through their e-residency and business in Estonia.

What do you expect from E-residents? Will there be any kind of tax burden?

E-residents usually pay taxes in the countries where they are living and creating value. E-residency does not mean tax residency. It means that e-residents can just use the platform and the business environment to facilitate their businesses.

So is that how you make sure that this doesn't become a kind of tax haven type scheme or a "letter box" company?

Yes, it is exactly the opposite. This is the opposite of something like Panama where people might have gone to try and hide their taxes and hide their companies; because e-residency is a transparent business. Each shareholder and manager is available as information to the public. We are also sharing the tax revenues with local countries and other governments. As everything is digital and so all the transactions leave digital footprints there is no way to hide, or protect any wealth you might have. That's why e-residents who join are those kinds of people who want to share transparency and show they can be trusted.

What do e-residents receive in return?

If a person is outside of the EU, from an emerging market, the main benefit is access to financial services, access to bank accounts, to online payment providers and access to crowd-funding sites etc. Most of the people today can't offer this kind of online business. The second thing is that through Estonia, people and companies have access to the EU business environment. Estonia makes all that very easy and convenient because it is all done digitally. So establishing a company takes just 10 minutes; you can open bank accounts online, everything can be signed digitally, all the contracts and taxes so it is pretty much cost free. The third reason why people apply is the freedom which an e-residency provides. Even if your country offers all the services and is pretty cost effective, people in today's world travel a lot. Sometimes those people's own countries might still require them to be physically present to sign something or declare something, but now people travel all around the world, digital nomadism is everywhere and e-residency helps run your business without having one fixed place of abode.

The more people and countries connected, the higher the value of the network

Have other countries enquired about whether or not they could offer a similar kind of program?

Yes we are actually helping many other governments to adopt this. We don't see this as a competition but rather a partnership because the more governments which offer this kind of services, the more players will be on the network and then the more value it brings to the network. We know that Lithuania is about to adopt it, we are helping Singapore, Japan and the Netherlands. Once a country starts serving its own citizens digitally as Estonia has been doing for the last 15-17 years then there is really no reason why you can't start serving other citizens too who want to take part in your business environment.

Kaspar Korjus is director of Estonia's e-residency program. If you are interested in applying for e-residency, you can go online to e-resident.gov.ee

Bristol goes rogue: British city launches own currency

AFP/Google, by Judith Evans (AFP), 16 Aug 2012

Bristol pound banknotes, which all contain symbols of local pride 

(AFP/File, Handout)

BRISTOL, United Kingdom — As Britain loses faith in its banks and feels shockwaves from the euro crisis, one city is trying to keep local wealth in local pockets with the launch of its own currency.

The Bristol pound -- usable only with member businesses in the city in southwest England -- is to launch in September, and organisers are deluged with local firms wanting to sign up.

"The perception of banking and money is that it's a very ruthless system: people are out for what they can get," co-founder Ciaran Mundy told AFP.

"This is about saying yes to something new. It's tapping into a different set of values about money."

The scheme has "captured people's imaginations", he added, in a recession-hit year when British banks have been beset by scandals and ministers talked openly of a possible euro collapse.

Hundreds of businesses have joined, from the acclaimed Arnolfini arts centre to the Chandos deli chain, and the launch had to be postponed from May to September 19 because of the level of interest.

Bristol is the first big city in

 Britain to launch a local currency.

(AFP/File, Adrian Dennis)

Security professional Richard Wright signed up his company Wright Guard as soon as he heard about the Bristol pound, hoping it would help him fight back against encroaching security giants.

"I'm Bristol born and bred, and I always want to support local businesses," he told AFP. "I'll want to keep the Bristol pound flowing."

The notes feature symbols of local pride from nineteenth-century religious writer Hannah More to the Concorde aircraft, partly developed in Bristol, and images of the St Paul's Carnival Caribbean street festival.

Evoking a long history of dissent, one side of the £5 note shows a tiger writing on a wall in graffiti: "O Liberty!"

Other British towns have launched local currencies, but Bristol, home to half a million people, is the first big city, and its scheme is ambitious.

Businesses can pay local taxes in Bristol pounds and the council has offered its 17,000 staff the option of receiving part of their pay in the currency.

Mundy's team -- funded initially by grants -- have designed an electronic system for payments by text message, plus what they say are forgery-proof notes.

Stores selling products from cider to skate shoes said they were considering joining the scheme, which Mundy believes will have a tangible economic effect.

"Eighty percent of the money leaves the area if it is spent with a multinational -- but 80 percent stays if it is spent at a local trader," he said.

Such localism might seem strange in a city that grew to prosperity as an international port and is now a centre for aircraft manufacture.

But Bristol is also a left-wing haven with an activist tradition. The People's Republic of Stokes Croft, an urban renewal group, made headlines last year with a campaign that became a riot in protest at the opening of a Tesco supermarket.

They have greeted the Bristol pound warmly.

"We need to run things from the bottom up and from the grassroots, so that people have control over how things happen where they live," said spokesman Chris Chalkley.

But Louisa Jones and Joh Rindom, co-owners of Stokes Croft vintage clothing store Shop Dutty, thought the scheme would just add to their administrative burden.

"We're sceptical that having a micro economy within a macro economy is a bit backward," Rindom said.

Ben Yearsley, investment manager at Bristol-based financial services firm Hargreaves Lansdown, also won't be rushing to convert his sterling.

"It's just a big gift voucher scheme... I'm sceptical that it's going to make any difference," he told AFP.

"Local businesses need to compete on quality and service."

The Bristol pound will not be legal tender and must be exchanged through the Bristol Credit Union, with a three percent charge for conversion back to sterling.

This and charges on electronic transactions will pay its running costs.

Despite the naysayers, Mundy hopes hundreds of thousands of Bristol pounds will be traded in its first year, increasing to "double figures of millions" by the third.

A man holds euro notes and the

 "Chiemgauer", the local currency of the

 southern German city of Raubling.

 (DDP/AFP/File, Lennart Preiss)

His model is the Chiemgauer, a German complementary currency of which millions of euros' worth is traded yearly.

Online database complementarycurrency.org lists more than 225 such minority currencies worldwide, of which 102 are in Europe.

They have won a high-profile advocate in Bernard Lietaer, a Belgian economist who helped design and implement the convergence mechanism for the euro.

"We will never have a stable, sustainable monetary system with a single monopoly of a single type of currency, whoever manages it," he said in a lecture in Brussels.

"Everybody can do something at their own scale... sustainability requires diversity," he added.

Mundy said that the ultimate test of his system would be the market.

"If people freely decide to market and trade with each other (in the currency), they should be able to do it," he said.

"If we're not doing a good job they won't use the system. Consumers will decide." 

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Ethical alternatives see applications soar in the wake of NatWest IT fiasco and Barclays rate-rigging scandal

guardian.co.uk, Heather Stewart, business editor, Saturday 7 July 2012

A customer cuts up her bank card outside a London branch of Barclays.
Photograph: Maciek Musialek / Demotix

Angry bank customers have been voting with their wallets and bombarding co-ops, building societies and credit unions with applications for current accounts over the past week, after the NatWest computer meltdown and the Barclays rate-rigging scandal.

Data compiled by the campaign group Move Your Money UK shows an explosion in requests to switch from large high street banks to smaller alternatives that consumers hope will take a more ethical approach. Charity Bank, which lends its savers' money to charities, has seen a 200% increase in depositors; the Ecology Bank has had a 266% jump in applications; and Triodos, a Bristol-based "sustainable bank", a 51% increase.

Credit unions, which are often small institutions investing people's savings in their local economy, have seen week-on-week increases of at least 20%, some of them up to 300%. Evidence of the growing number of switchovers comes as Ed Balls, the shadow chancellor, on Sunday calls on the government to make it easier for consumers to switch to another bank or building society. Speaking on the BBC's Andrew Marr Show, Balls will say that while people are increasingly dissatisfied with their banks, it is still too difficult for customers to switch accounts. He told the Observer: "Ministers are dragging their feet on reforms to improve competition and consumer choice in the banking sector. Consumers must come first. It's time for action."

Consumers have been looking for alternatives to the mainstream banks to protest about the revelation that Barclays traders conspired to fix a key interest rate over a number of years; and the IT chaos that left millions of RBS customers unable to access their accounts.

Since the start of this year, Move Your Money UK estimates that an average of 80,000 savers a month have been leaving the crisis-prone banking giants – a total of almost half a million since the start of 2012. The Co-operative Bank, which has seen a 25% rise in applications over the past week, hopes to capitalise on the public's frustration by trebling its number of branches to 1,000, if it can clinch a deal to buy 632 from Lloyds Banking Group.

Lloyds, which was bailed out by the taxpayer during the financial crisis, was ordered by Brussels to sell the branches when it took over the troubled HBOS.

Co-op's unusual management structure, with a board that included a Methodist minister and a plasterer, had initially caused some concerns at City regulator the Financial Services Authority, but the takeover now looks close to being completed, and Co-op hopes it will enable it to become a major player on the high street. The coalition, which has said it would like to see more competition in the banking sector, is also keen for the Co-op to succeed.

Move Your Money has organised community events and protests to publicise alternatives to the so-called big five — Barclays, Lloyds, HSBC, RBS and Santander. "There's a decline in trust," said spokesman Louis Brooke. "You can lose your trust in a bank because you don't believe they've got enough money, a la Northern Rock, but that's not what's going on here; it's that people no longer see the banks as legitimate institutions."

Adam Scorer, director of external affairs at the advocacy group Consumer Focus, said: "Consumers have decided to mete out their punishment by moving away from banks who have been tarnished by recent events and revelations. RBS have failed on the basics of managing their customer accounts. Barclays have failed on the basics of behaving with honesty and integrity. These might be very different issues, but they both degrade the reputation of banks in the eyes of their customers." Many British banks shifted from being "mutuals" – owned by their customers – to shareholder-owned public companies in the 1980s and 1990s, in a wave of "demutualisations", seen as making them more successful. But as bankers' pay has exploded, and profits flowed to shareholders rather than savers, a growing number of people have begun to warm to the idea of old-fashioned mutuals, including building societies.

Andy Haldane, the executive director for financial stability at the Bank of England, has also suggested that new alternatives, such as peer-to-peer lending companies, which connect borrowers and savers, could eventually become rivals to the banks.

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Peer-to-peer lending via the internet hits £250m

BBC News, By Simon Gompertz, Personal finance correspondent, 8 June 2012

Savings and Investment 

• Will investment charges become clearer?
• Q&A: Is Santander UK a safe bank?
• Three years of record-low rates
• Families hide wealth to avoid care fees

Lynne Martin's money is spread
 among hundreds of borrowers, thus
reducing risk

Lending via three websites that link savers with borrowers - bypassing the banking system - has topped £250m.

The "new age" finance carries no protection for deposits, but is being tipped as a serious threat to traditional banks.

The peer-to-peer sites are led by Zopa, which has lent more than £200m since it started in 2005.

Funding Circle, specialising in business loans, has topped £34m, and RateSetter has reached £24m.

Last month the government said it would lend these sort of firms £100m to help expand their own lending to businesses.

"It's a marketplace, the eBay for money," says Lynne Martin from Hertfordshire, a foot technician in her late 50s who has been using Zopa to build up a nest egg for retirement.

Higher returns

Lynne was fed up with the returns she was getting from banks and pension plans.

So she has lent a substantial part of her savings via the website, spreading it between hundreds of borrowers and by-passing the banking system.

The interest from the latest £5,000 is 7.4% a year before tax but after taking into account Zopa's 1% charge.

That is substantially more than is available on a typical savings account at a bank.

On the other side of the ledger, Jamie Hirst from Chippenham in Wiltshire has borrowed £4,500 through Zopa to cover the cost of a revamp of his kitchen and bathroom.

The 8.4% APR he is paying is 5% less than he was quoted by his bank.

"I thought it was brilliant," he told the BBC's Your Money.

"The fact that there wasn't some fat cat taking the profits, just some guy investing 50 or a hundred quid to get a little return and doing something good for someone else."

The drawbacks

There is a significant drawback for savers: the lack of any guarantee that you will get your money back.

Peer-to-peer lending, as it is known, does not qualify for protection from the Financial Services Compensation Scheme (FSCS), which provides security up to £85,000 per bank, for each saver.

The peer-to-peer sites put their loan applicants through credit checks and Zopa says it divides people's savings into £10 chunks which are spread between borrowers, to minimise any risk.

On average, so far, its lenders have lost 0.5% of their money as a result of borrowers defaulting.

But Lynne Martin predicts the concept is bound to catch on more widely.

"Necessity is the mother of invention," she says.

"This is a new asset class. It's not a share and it's not a bank account."

Official support?

Lynne has support from a director of the Bank of England, Andy Haldane, who suggested in March that peer-to-peer lenders could replace High Street banks. 

Jamie Hirst has been able to borrow
 money at a cheaper rate than from
his bank

"There is no reason why end-savers and end-investors cannot connect directly," he explained.

"The banking middle men may in time become the surplus links in the chain."

Lynne is hoping the interest she is earning will help pay for her to retire to the West Country, a hope which highlights an interesting feature of peer-to-peer lending.

Much of the money has been moving across generations, from older people looking for a decent income to younger borrowers setting up in life and desperate to keep down the cost of taking a loan.

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"The New Paradigm of Reality" Part I/II – Feb 12, 2011 (Kryon channelled by Lee Carroll) (Subjects: Egypt Uprising, Iran/Persia Uprising, Peace in Middle East without Israel actively involved, Muhammad, "Conceptual" Youth Revolution, "Conceptual" (without a manager hierarchy) managed Businesses, Internet, Social Media, News Media, Google, Bankers, Global Unity,..... etc.)