Estonia vs Bitcoin saga: Requesting EC Start Infringement Proceedings Against Estonia

Background

Back in early 2014, when Bitcoin first gained some attention in the mainstream media, the Estonian government undertook to hinder the development of Bitcoin in the country as much as possible. Apparently out of fear that it could be used for something "bad". Their anti-Bitcoin measures consisted of the following:

• Bitcoin was subjected to V.A.T. over the whole value of a Bitcoin. For instance if you bought 1 Bitcoin for 500 Euros, you'd have to pay an additional 100 Euros in tax to the Estonian state. Estonia was the only EU country to apply V.A.T. so drastically to Bitcoin. A few other EU countries did want to impose V.A.T. on the service fee, but never on the whole amount. The Estonian state predictably never made a cent from this tax, but then the purpose wasn't to raise money anyway, but instead to hamper Bitcoin. At which it succeeded. The Estonian tax on Bitcoin was eventually shot down by the European Court of Justice (ECJ) in 2015, in spite of Estonia making a great effort to convince the ECJ to impose this tax on Bitcoin in the entire EU. The ECJ thankfully ruled that since Bitcoin played the role of money in a transaction, it should be treated the same way as money when it comes to V.A.T. (i.e. exempt from V.A.T.).

• Estonian tax authorities do not recognize Bitcoin as an investment, unlike say gold, shares or foreign currency holdings. This means that profits can not be reinvested, as they can for other investments, but are taxed immediately, and since Bitcoin is not considered an investment, profits may be liable to social charges as well. This measure still stands in Estonia today.

• The Estonian Financial "Intelligence" Unit (FIU) secretly classified Bitcoin and reinterpreted an old AML law to apply to it. A law that was never made by parliament with Bitcoin in mind, as Bitcoin didn't even exist at the time. This extremely restrictive law, requires Bitcoin buyers and sellers to meet their customers face to face, for amounts exceeding a mere 1,000 Euros per month. Whereas normal AML rules apply for amounts exceeding 15,000 Euros and do not require meeting face to face. The FIU then proceeded to randomly pick two people to make an example of. One of those people was me. Ever since, I've been trying to get this anti-innovation law struck down.

The Estonian FIU threatened me with a 32,000 Euro fine and 3 years in prison. They then ordered me to supply them with all the information they could use to charge me with. I refused, and instead took to fighting back in court. The case went all the way to the Estonian Supreme Court. Where I lost. In the mean time though, I had brought my family and myself to safety in another country (the Netherlands).

Nevertheless I am not leaving it at that. My next step is to take Estonia to European level courts. Courts which are not filled with judges whose salary is paid by the very same state I have a conflict with. But also courts where I can file complaints and read decisions in a language I fully understand.

EU Anti Money Laundering (AML) Law

The court case in Estonia was complicated and encompassed many issues, such as denying me my constitutional right not to incriminate myself (which would be equivalent to denying someone their 5th amendment privilege in the US). Several of those issues will be dealt with in a separate complaint to the European Court of Human Rights (ECHR), to be filed in the very near future.

The current complaint to the European Commission however, doesn't deal with the human rights aspect itself, it deals specifically with Estonia's violation of EU AML Law.

I'll try to keep it short (you can read the whole filing below - in the attachment section). In essence EU AML law does not allow countries to arbitrarily extend AML measures to other areas not covered by EU AML Law. Bitcoin and other cryptocurrencies did not fall under EU AML regulation that was in force at the time, thus extending it was a unilateral action by the Estonian state.

For a member state to extend AML law to other areas, they have to fulfill the following conditions:

• Show that there is a significant risk in the area they are extending it to.
• Inform the European Commission (EC) of their extension.

The Estonian government failed to do both of these things.

Yet the Estonian Supreme Court, while applying the law as strictly as possible to an individual (me in this case), did not mind the state's failure to abide by EU law, nor the total lack of proportionality in these regulations. It would be one thing if Bitcoin were treated like US Dollars or gold, but it is not.

Infringement Proceedings Against Estonia

As Estonian courts are clearly unwilling or unable to enforce EU law on the Estonian state itself, my lawyer has now filed a complaint on my behalf with the European Commission, asking them to start infringement proceedings against Estonia.

In my mind there is little doubt that Estonia violated EU law by arbitrarily extending AML law to Bitcoin and imposing ultra-strict regulation, that lack all proportionality. In my opinion this was clearly done, not to prevent money laundering, but rather to prevent Bitcoin from being used in Estonia.

I hope states are not above the law. If the EC takes this up, and forces Estonia to amend their law, one more of Estonia's anti-Bitcoin measures will be shot down.

Attachments

• Scan of signed filing as sent to the EC. Also available on Scribd.
• Original PDF of filing.

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Bitcoin necklace made by my daughter, who gets part of her pocket money in Bitcoin.