It goes a little something like this. Otto de Voogd, a Dutch man, decides to start a service exchanging bitcoins to euros. He is a software developer and a bitcoin enthusiast. He starts the webpage btc.ee, to deal with bitcoins. Everything is relatively pretty. Then the government comes into play, probably suspecting Otto of terrorism or money laundering. The Financial Intelligence Unit (FIU from this point forward) submitted a precept, with which Otto was supposed to present a description of his operation, questions were asked regarding the sale and purchase transactions.
Otto registrered his server in the United States. Estonian police say that they have jurisdiction, because the web page BTC.ee has an Estonian translation of it. It’s a bit something like this, that Russia has jurisdiction over the Estonian news portal Delfi, because it has a russian version of its site. Doesn’t really seem logical or legal. A question pops up, that if a bitcoin deal takes place on the internet, where is that internet located? US server? The network of Elion?
The FIU, (probably created after the Autorollo scandal, because where the fuck was it when that happened?), almost the most horrible form of police, (the #1 spot is held by narcs) sent a letter to Otto, requesting cooperation on his side, in an investigation, against himself. Otto couldnt wrap his head around it, but who could? Can you feel it, its the Soviets coming back? Testify against yourself, plead guilty, win a free trip to the gulag, yo! Or get fined 32 000 euros, or sit three years in jail. Not gulag in the straight sense, but well, you can see the common element.
They tried to judge Otto using a law that comes from the year 2007. The first bitcoins were issued in 2009. Bitcoins have not been legally defined, only recently have there been attempts at it. There is no legislation at the level of regulations. The proceeding begun in the first half of 2014. Otto was sent an e-mail, which culminated with the precept we discussed in the first paragraph.
When the proceeding began, neither the FIU, or any other government institution, had published any instructions, on how to deal with bitcoins, what are bitcoins, or what are the requirements for people who deal with bitcoins. There were different press releases, where the Estonian Bank warned consumers, that bitcoin is a risky object of investment, but also said, that Financial Supervision doesn’t handle bitcoins.
Estonia started getting a bit creative at this point. This reminds me of a children’s book, where the characters try to solve problems in the shittiest way possible. But that’s a childrens book, not real life, right?
Yeah well, EU law does not know the term “alternative means of payment” – the third directive of the anti money laundering law does not regulate it at all. It does not regulate virtual money, or contain the concept of an alternative means of payment. According to Otto’s lawyer, the alternative means of payment law, that Estonian police is applying in the case of bitcoins, is a violation of EU law, because it’s an extension of EU’s AML law, and any local extension of that law has to be coordinated with the European Union.
To extend an existing law, two preconditions are necessary:
1) If we extend the circle of obligated subjects, it can be done only then, if the service is provided in an area, which can most likely be used for the purpose of money laundering, so to say, for persons, who may use the service for this purpose.
2) Notification. We haven’t been notified, that the government has roughened the state of things. There has been no impact analysis, which would look into, for example, how many % of bitcoins may go into funding terrorism. The only reference has been to the so called e-gold.
A question pops up, that how could Estonian lawmakers foresee, in the year 2007, anything pertaining to cryptocurrencies. The first article mentioning bitcoin was publicated in the year 2008. (Satoshi Nakamoto’s article) The first bitcoin was issued in the year 2009. It would have been logical, that if the country had wanted to go further when fighting with e-gold, they could have lengthened the distance even more, for example, in 2009, by performing a market analysis, if bitcoins may be used for funding terrorism.
Why does the Estonian government think of bitcoins as a dangerous area? If it has not been prohibited and if it is not subject to Financial Supervision. In the case of bitcoins, we are dealing with a legally ambiguous situation, if it’s all crystal clear, the government should publicize instructions on how to act. But the fact, that penalization starts before the right law has been developed – well that’s some North Korean level shit.
If this topic was so dangerous to the stability of financial systems, it would be clear, that the circle of obligated subjects would be extended to people who deal with cryptocurrencies.
Oh, by the way, why did this thing make it from the administrative court to the district court?
The administrative court did not discuss the argument about extending EU law, they ignored it. Otto thinks, that the judge spoke the words that the police gave him. This is nothing out of the ordinary in Estonia of course, but for a man, who comes from a country, with real rights, well, he can be astounded.
As am I. Hey, Aivar Paul, the head of the FIU, come on a little journey with me. Lets line up some words. Innovative. Favoring enterpreneurship. Excellent. So, these words are for describing what? e-Estonia? Fuck no. I dont know what things those words describe, but e-Estonia is certainly not one of them. For me, the current e-Estonia leaves me with an impression, that in the case of e-Estonia, they mean the politicians ability to use Twitter. Somebody call Edward Lucas, let him save our reputation! Or atleast that, which is left of it. Innovation has been set under the guillotine before it can even lift its head. You scare away people who could develop something here, who could make a difference.But no, off to jail, letsgo.
And then we wonder, where is Estonia’s tiger’s-leap? Where is our Silicon Valley? As sad as it may be, its behind papers. The emotionless machinery of blind bureaucracy is top notch at executing regulations and laws, but that is the only thing. It’s strange of course, that the machinery has done things according to regulations, that, from the viewpoint of common sense, should not apply. I heard of a little mishap, that happened in Russia, where some guys were also doing their little bitcoin thing. The police performed a raid, busted down the office door and asked: “Where are the bitcoins? Show us!” We aren’t nearly there yet, (for now), but I can imagine how the collective dicks of the FIU got hard when they found out that they can tax something new.
Oh, by the way, besides Otto there was one more person targeted by the police. He was accused of money laundering and trading without a licence, for performing two deals where the total amount traded was less than 2000 euros. Besides him and Otto, nobody else has been targeted. Otto thinks, that it may be because they were 2 persons who were easy to identify, but Otto himself had no problem finding other people who traded bitcoins. But the police confirmed, after the first court hearing, that only Otto and the other person are the only so-called victims.
And after the beginning of this saga last February, Otto thought, that why should he fuck around here, and he has taken his life and family to the Netherlands.
Otto thinks, that in a country, which has a healthy legal system, the law applies to everyone or no one. I sat down with him after the court session and exchanged a few words.
S: What do you think, are you winning this time?
O: Oh, well, I don’t really want to get my hopes up, the last time I had high hopes that the court would be reasonable, the judge said what the police wanted, and did not consider the arguments regarding the European directives. Will this court be better? I hope so.
S: If you win the case, will you continue with bitcoins in Estonia, or is that road closed?
O: No. It’s more reasonable in the Netherlands. The law is applied either to everyone or no one. A lot of effort is made, that everything would be right. The Netherlands is more trustworthy regarding this. In Estonia, there is no certainty, that a secret part of some law is not used against you.
S: How about other ventures?
O: I loved living in Estonia, but im feeling more and more that it’s a bit broken. It depends on the venture, Estonia has to offer a bit more, than it used to, to be better than the Netherlands. Estonia is a bit more modern, when it comes to government IT stuff, the Netherlands, not so much, there private enterprise is a ahead of the government.
S: How should your situation have been resolved?
O: One must think, before acting. This is the basic principle in every area of life. You have to hold a discussion, like, how are we going to deal with this bitcoin thing, by the representatives of the people. If the court decides, that It’s okay to do, as was done to me, it’s a very bad sign. If not, it’s a good sign. Ive noticed two trends applying to Estonia, on the one hand, people are getting richer, less people live in poverty, but on the other hand, there’s a little less freedom there than before. This might be an overall tendency of western countries though.
By the way, Otto gave me the first bitcoins of my life. I’ll probably buy something cool with it, maybe rolling papers or cigarette lighters. The court decision will be announced on the 18th of June. We’ll see, what happens.
Read Otto de Voogd’s speech held in court here: http://nihilist.fm/otto-de-voogds-speech-held-in-court/