Why Estonia's EU "Digital Residency" Is Getting Popular In China — And Taiwan
China accounts for the fifth largest contingent of digital residents after Russia, Ukraine, Germany and Finland, and the number one that's not on the European continent.
The origins of digital residency
Several Chinese-speaking groups of Estonian digital residents can be found on social networking apps such as Telegram and WeChat.
Most of the digital residents from China do not live in Estonia and have never even set foot in the former Soviet republic, now an EU member state, which borders Russia to the east and is separated from Finland and Sweden by the sea. According to the project's official statistics, for every 100 digital residents, 24 would register an Estonian company; for every 100 digital residents of Chinese origin, only eight would do so.
The project was established in 2014 because of a practical problem that the Estonian government was facing. As a significant part of Estonia's basic services such as communications and banking are provided by Nordic companies, the government wanted to reduce the operational costs of cooperation by setting up branches in Estonia for these foreign entrepreneurs and investors.
The "digital residency" would allow these people to have a government-backed identity in Estonia, set up an Estonian business in a simple process and access government services smoothly.
A global citizen, regardless of location
It did not take long for the project to receive an unexpectedly enthusiastic response. Toomas Hendrik Ilves, then President of Estonia, with the other three project founders, decided to run the project like a startup, recruiting more "customers" to join. One of the founders, Kaspar Korjus, told a worldwide audience at a Ted Talk in 2016 that Estonia's digital residency program offered the possibility of "becoming a global citizen regardless of nationality or location".
30% of companies registered in Estonia today are created by digital residents.
While there are many attractive business environments around the world, with a digital resident status in Estonia, it is possible to register a fully remote company without local employees. Although taxes in Estonia are not low, an EU business entity status is quite attractive to many digital residents, as it is also much easier than opening an offshore company in Hong Kong, Singapore or the Cayman Islands.
Today, 30% of companies registered in Estonia are created by digital residents, and they provided the government with €24 million in tax revenue in the first half of 2022.
A hub for Chinese bitcoin users
According to the official data, there have been three peak phases of Chinese citizens joining the "Digital Residents" program. Each of these peaks has been associated with a crackdown on digital currencies by the mainland Chinese government.
Prior to September 2017, mainland China was a hotbed for the global expansion of digital currencies – around 90% of the world's bitcoin transactions took place in mainland China and nearly half of all bitcoins were mined by China-based mines. The situation changed after a government ban was issued on Sept. 4 2017, which defined ICOs (initial public sales of coins) as illegal financial activities.
As soon as the ban came out, many Chinese-founded world's leading digital currency exchanges had to shut down all trading in China. Two further bans came out in 2019 and 2021, banning all trading and bitcoin-mining in China.
In the midst of increased crackdowns, the Estonian "Digital Resident" program has been circulating in the Chinese cryptocurrency community. In March 2018, 185 Chinese nationals became "digital residents" of Estonia, the highest number of Chinese applicants in a single month.
The mentality of E-residency
Liu, a 26 year-old E-resident of Estonia, is an active user of Bitcoins and an entrepreneur in decentralized NFT gaming communities. Describing himself to be "apolitical and only interested in money", Liu says he wants to live in a place with "the right to choose" as a digital nomad. "having the mentality to 'escape' enabled me to join the Bitcoin circle."
Having lived through the harsh COVID policies in China, he "escaped" Shanghai before the lockdown took place in March 2022. "The COVID policies are just problems on the surface. The regime is destructive to the development of the country, and I simply just don't want to be Chinese anymore."
The future is already here, it is just not very evenly distributed.
Many Chinese people described how the E-residency meant a lot to them outside its practical function.
Rubin, an E-resident who hasn't left China yet due to his business, described how this project fits his own personal values and vision of a "decentralized future". He quoted a sentence many Bitcoin players in China believe: "The future is already here, it is just not very evenly distributed." Like many others, Rubin believes the Estonian model of digitalized governance would be the future for sovereign states, while technologies like blockchain could replace the centralized system of today.
Path to new identities
The average age of applicants from mainland China is 34 years, which is younger than most other countries. They have experienced China's economic take-off after the reform and opening up, as well as the building of a capital market from scratch, which is similar to the establishment and growth of the young republic of Estonia. This coincides with many applicants who want to escape the old order.
Apart from mainland Chinese, many Taiwanese are also attracted by an escape to Estonia. Yang is a technical entrepreneur who applied for the E-residency in 2016, whose wife Lin is the first Taiwanese female who applied for the program.
Yang had wanted to leave Taiwan for a long time. On the one hand, Taiwan's economy has slowed down since around 2010, which is not conducive to startups; but more importantly, he was tired of Taiwan's politics.
"[Taiwanese] don't like the flag nor the national anthem, but they don't change it either. The constitution indirectly says that China is part of Taiwan, and the reality is that Taiwan (may) have to become part of China," he says. "You would feel sad if you are conscious of these, and that sadness can't be changed, so one would want to escape. I want to give my children the option of not being Taiwanese."
Over the years, the E-residency project has become the main way for the world to learn about Estonia. An official review of the project released at the end of 2018 showed that over 80% of English search results for Estonia on Google were related to the project, although each person had different expectations of it -- to talk to the world, to use it to develop the blockchain industry, or to embrace a decentralized future ...
But most of all, it seems to offer a path to new identities that contradicts today's established world order.
