November 7, 2016

Estonian e-Residency

Europe
Tested policy
Description of the core change(s) brought by this policy instrument

Estonia is creating a new borderless digital nation for global citizens, powered by Republic of Estonia, where no one is held back from their entrepreneurial potential. E-Residency is a transnational government-issued digital identity that anyone in the world can apply for and then gain access to a platform built on inclusion, legitimacy and transparency. E-residents have access to the EU business environment and can use public e-services through their digital identity.

Please list the implementing agencies

The e-Residency application process is the result of an exceptional cross-governmental collaboration between the Ministry of the Interior and its IT and Development Centre, Police and Border Guard Board, Ministry of Justice, Ministry of Foreign Affairs and Estonian embassies and consulates worldwide, Ministry of Finance, Information System Authority, Office of the President of the Republic of Estonia, Government Office of the Republic of Estonia, Ministry of Economic Affairs and Communications, Enterprise Estonia and others. 

Lifecycle of target firms for this policy instrument
Start-up firms
Support offered
Non-financial Support
Level of intervention
Entrepreneur-level
Barrier(s) addressed with this policy tool
Regulatory/policy: red tape/bureaucracy
Regulatory/policy: startup-tailored measures
Skills & training: access to talent pool
Abstract summary of this Policy resource

E-Residency offers the freedom for every world citizen to easily start and run a global EU company fully online from anywhere in the world. 

E-residents can:
1. Establish a company online in a day
2. Manage the location-independent company fully online
3. Apply for a digital business banking account and credit card, and conduct secure banking
4. Acces international payment service providers (PayPal, Braintree, etc.) 
5. Digitally sign and transmit documents and contracts  
6. Declare taxes online 

All of this can be done in a cost-efficient and hassle-free way, without the need to hire a local director. The smart ID card contains a microchip with two security certificates: one for authentication, called PIN1, and another for digital signing, called PIN2. 

E-residency does not provide citizenship or tax residency and does not confer the right to live in or visit Estonia or the European Union.

Policy timeline

The beta launch of the program was on December 1, 2014. Since then, the Government of Estonia has made amendments to the Identity Documents Act and to the Money Laundering and Terrorist Financing Prevention Act in an effort to keep developing and improving the program. E-Residency continues to foster exceptional crossgovernmental collaboration and establish new partnerships in the private sector.  
 

Stated goal/metrics of the policy instrument

The initial aim of the program was to have 2,000 e-residents signed up in 2015. By the end of July of 2015,
the program had received more than 3,600 applications. Against this backdrop, in that same
month the government set the new target of having 5,000 e-Residency applications by the end
of 2015. The program – still in beta phase – exceeded every goal by obtaining more than
7,400 applications in 2015. As of Novermber 2017, more than 27,000 applications have been received from 140 countries, and more than 4,000 companies are been managed by e-residents. The current goal is to have 20,000 companies by 2020.

Evidence of results

As of November 2017, the program has received more than 27,000 applications from 140 countries; and more than 4,000 companies are managed by e-residents.

In May 2017, e-Residency partnered with the Finnish fintech company Holvi to provide borderless business banking to the borderless digital nation. This means a complete EU company with complete EU business banking (& a payment card) can be established entirely online. This partnership with Holvi significantly enhances the value of e-Residency because the needs of the growing community of e-residents are a perfect match with the services that they provide. As the community of e-residents grows, so too does the entrepreneurial ecosystem around e-Residency.

In July 2016, e-Residency became a founding partner of the “eTrade for All” initiative of the United Nations Conference on Trade and Development (UNCTAD). Together with companies in the private sector and key international organisations--including the World Bank Group, the World Trade Organisation, Google, PayPal, eBay, and other United Nations agencies and regional commissions— the e-Residency programme vowed to help expand the benefits of e-commerce to developing countries. E-Residency’s benefits of conferring the ability to administer a location-independent business online, conduct e-banking and having access to online payment service providers, are key in making e-commerce happen – and go in hand with the “eTrade for All” initiative objectives.  

E-Residency has additionally announced that in December 2017 it will open its first "e-Residency center" in Seoul, Korea, in an effort to expand the reach of the program. This will be a pilot project, but if e-residents start using the update, then it will be possible to open other centers in the world to also hand out the e-Residency digital ID cards.

The e-Residency program continues to build partnerships across different sectors to expand the reach of the programme and to enable e-residents to take advantage of a marketplace of services specifically made for them.

Challenges, criticisms and lessons

As the first initiative of its kind in the world, e-Residency is a result of the extraordinary efforts
from the team and from different ministries and agencies across the Estonian government.

For example, after the launch of the public beta version of the program, e-residents were still
required to travel to Estonia to open a bank account. This prerequisite represented a challenge
for the creation of an enabling environment for e-residents to establish their companies in
Estonia. A recent change in the Estonian AML regulation, that entered into force on November 1st, 2016, allows Estonian residents and e-residents to open bank accounts withour being physically present for identification purposes. E-Residents who log into a who log into a secure system using their e-Residency cards will be able to identify themselves via a video connection. However, a fully online option to access EU business banking is already available to e-residents, since in May 2017, e-Residency partnered with the Finnish fintech company Holvi to provide borderless business banking to the borderless digital nation. This means a complete EU company with complete EU business banking (& a payment card) can be established entirely online.

Another challenge is that during the first few months after the launch of the program, people needed to travel to Estonia
to have one face-to-face meeting and to pick up their e-Residency card. This requirement
imposed a cost to the applicant and a challenge to the expansion of the program. Since April
of 2015, people are now able to collect their e-Residency card and have the face-to-face
meeting at one of the 39 Estonian foreign representations (embassies and consulates) or at
the Police and Border Guard Board service points in Estonia. The program is working to
expand the number of collection points to meet global demand and will open a first center in December 2017 in Seoul, Korea, in partnership with the private sector.
E-Residency continues to streamline the processing time to obtain e-Residency and to work
with the private sector and with the Estonian government to develop a cutting-edge and
valuable program for the benefit of e-residents and of Estonia.

Geographic scope
National-level