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Country-as-a-Service – Comistar’s Role in Estonian’s Fintech Revolution

Interview by Zoya Malik

Comistar Estonia is an official partner of the Estonian e-Residency programme providing legal (focus on licensing and tax) and accounting advice for foreign entrepreneurs and investors coming to Estonia. Mikk Maal, CEO of Comistar describes to Zoya Malik, managing editor The Fintech Times of Comistar’s tokenisation services and advocacy with financial regulators for ‘ease of doing business’ for fintech entrants.

ZM: What is your role in furthering trade relations for businesses and capital flow to and from Estonia?

MM: We try to make it as smooth as possible for investors and companies to enter the Estonian market. Of

Mikk Maal, CEO Comistar Estonia

course, we also promote Estonia as much as possible at different conferences, we publish reports on Estonian business prospects and advise regulators on creating a better business environment than it is currently.

ZM: What is your interest in tech investment and FDI into Estonia? How does Estonia partner and leverage local expertise to develop fintech platforms? 

MM: I think it’s important to understand that Estonia is a very small country without any remarkable natural resources or industries that can carry the economic growth. Hence, we have to have an attractive business environment, and we have to be innovative and welcoming to new technologies.

I think Estonia has a great IT infrastructure to build upon – we’ve digitalised healthcare, the school system, voting, tax returns, company registration and management, public transportation and so forth, but we definitely need to do more as a country to take advantage of the work already done, especially if we’re talking about the fintech industry. We like to talk about Estonia in the context of, “Country as a Service”.

We try to make it as smooth as possible for investors and companies to enter the Estonian market.

This means that the IT infrastructure we’ve built is used as a platform for starting new borderless businesses. This is the whole concept of the Estonian e-Residency programme. However, if we talk about the fintech industry specifically, then this is obviously a regulated industry, and I feel the regulator hasn’t made the necessary adjustments in order to use the existing platform to become a standout jurisdiction for fintechs.

Starting a business in Estonia is still easiest throughout Europe and the fintech industry is growing rapidly here as well, but there is still much scope remaining to improve our status as a fintech hub. It doesn’t require anything complex to start with; it can be a simple public statement by the government that we’re open for fintech businesses to come here. Estonia needs to focus on the big picture and to understand what it is that we wish to be, and what it takes in order to keep the momentum going.

For Comistar, it’s always great if more investments and money flow to the economy, and more businesses are built here. As we usually assist foreign entrepreneurs and investors, it’s in our interest to make sure investors are protected properly.

ZM: What is Estonia’s regulator doing to create market confidence within Estonia’s financial sector and economy?

MM: It really depends on the angle from which we look at things. Estonia’s regulator is quite strict with all services related to money handling, and this certainly in itself creates a cleaner and more credible market, and minimises the risks for the economy as well. From an economic perspective, Estonia has the lowest government debt compared to the GDP in the whole of the EU meaning that banks are strong and the tech industry is booming. Of course, we’re not immune to the economic downturns as we depend heavily on the foreign markets, but we are as good as we could be.

We like to talk about Estonia in the context of, “Country as a Service”. This means that the IT infrastructure we’ve built is used as a platform for starting new borderless businesses.

For a starting business, however, it may not be a good thing when the regulator is strict, as it could prove demanding to meet all the requirements. The requirements for the fintechs are largely set at EU level, and it’s quite safe to say that Estonia doesn’t hand out licenses very easily. There are upsides to this approach. For example, the Payment Institution license obtained in Estonia is a sign of quality, compared to some other jurisdictions, where acquiring a license is seen as easier.  At the end of the day, it’s about making the best overall choice, which includes licensing, image, tax and ease of doing business in general.

ZM: What is the current environment for fintechs’ ‘ease of doing business’ in Estonia? What more is needed to incentivise fintech entrants?

MM: I would say any fintech business has to take into account the fact that licensing is required, and this brings extra cost and burden to the entrepreneur. Not only in the EU, but everywhere in the world and it’s a good thing because consumers need protection. From the Estonia regulatory perspective, I would advocate some of the following ideas which would simplify doing business for fintechs:

– simplify the licensing process (online application forms, frameworks, easy to understand guidelines, plug and play solutions for parts of the required documentation).

– actively market and state that Estonia welcomes fintech businesses as a fintech hub. It has to be a national initiative.

– through such policy, the direct officials working on the licensing processes act as support staff in guiding the applicants and fintech companies through the regulatory environment.

– limit any sanctions or licenses revoked for the first year of business.

– lessen requirements which are decided on the Member State level

ZM: What is Comistar’s TokenizeEU platform for STOs? How will STOs work offer capital liquidity and ease of transactions? How will STOs open market opportunity for investors into Estonia and global trade?

MM: TokenizEU (pronounced Tokenize EU) is a security token issuance platform in the European Union. We help companies to tokenise their assets/equity and conduct regulated offerings. It’s a technology platform at its core, coupled with legal compliance. Our primary focus is on the European market and European investors. We do accept North-American and Asian companies as well, if they wish to use an European SPV (special purpose company) to raise capital in Europe.

comistarIt’s still very early days for the TokenizEU platform, but we’re advising our first clients, and building a pipeline for offerings for the second part of the year. We’re very strict with our criteria for clients, and following all the scams and fake companies in the ICO market, we really want to build out the STO market in a very different way.

ZM: What is the environment for cryptocurrency development, ICOs and STOs and cryptocurrency exchanges in Estonia? What more is required to develop this market and create liquidity for investors?

MM: Estonia has two very specific licenses that are highly interesting for cryptocurrency exchanges. These licenses are specific to Estonia (e-wallet license and license to exchange digital currencies against fiat money and vice versa). This is something that no other jurisdiction offers, and it’s a really good initiative by the Estonian regulator. However, these licenses only allow opening a cryptocurrency exchange for utility tokens (i.e. Kraken, Binance, and Coinbase etc.).

With security token exchanges it is different, as securities can only be traded on regulated markets. For STOs, a company has to procure an Investment Firm license, and open a Multilateral Trading Facility (MTF). The main requirements for this type of license is set by the European Union, and the requirements are similar, if not identical, in all Member States. As the security tokens are the future, then having these trading platforms for security tokens is a must.

TokenizEU (pronounced Tokenize EU) is a security token issuance platform in the European Union.

There are quite a few such exchanges popping up for security tokens everywhere in the world, including Europe. I know Binance is working with the Maltese Stock Exchange, Gibraltar is working on that, London, etc. and there are companies which are in the midst of licensing process in Estonia as well.

Of course, we need more quality companies doing STOs in order to create a retail investor market. Quality projects and real companies, not on-paper-companies. I would say Europe is an excellent place for STOs, as the offering can be carried out within all the EU. And while choosing the best jurisdiction within the EU, it’s important to have good access to the regulators, and minimise the bureaucracy, as this will allow for quicker process. For this, Estonia is a great option as well, together with a few other countries.

ZM: How does Estonia differentiate over other ICO jurisdictions globally?

MM: It’s really difficult to answer without having a thorough knowledge of other ICO jurisdictions. We’ve had quite a few clients that have come to Estonia to conduct an ICO, after they had started the process in Malta. It’s because we’re a lot quicker, and sometimes also because of the lower costs. Estonia is fairly liberal, as long as the token doesn’t qualify as a security. If it’s a security, then it’s a regulated offering and it’s a whole different ball game (unless financial exemptions apply, for example, offerings below €2.5 million).

ICOs do not have a specific regulation here, and if you have a proper utility token, then it’s relatively cost-effective to conduct an ICO in Estonia without regulatory risks. It’s many times cheaper compared to Malta or Switzerland. If it’s a real utility token project, and you’ll have proper risk warnings, solid investor agreements, data processing agreement and other relevant information available for the investors, then Estonia is a very good place for an ICO.


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