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2015-Feb: E-mail conversation with the Estonian Financial "Intelligence" Unit, mostly with its boss Aivar Paul. Layout edited for clarity.

As they did not answer my previous requests for information, seemingly refusing to answer anything I ask. I just asked them for the clasification of Litecoin, to see if they answer anything at all, and refusal to tell me how Litecoins are classified would have been an interesting twist.

From: Otto de Voogd 
To: Rahapesu
Sent: Tue, 10 Feb 2015 01:39 +0200
Subject: Teabenõue
Tere,

Under Estonia's public information act, known in Estonian as a teabenõue, I hereby request the information listed below from the Estonian Financial Intelligence Unit.

1. What are Litecoins classified or treated as under Estonian law?

2. Please provide the legal justification for that classification.

I kindly request that you answer in English.

Regards,
Otto de Voogd

In his response Aivar Paul makes two interesting statements repeating what he has said to the media and what the FIU lawyer said in court:

1. That there were *centralized* cryptocurrencies, insinuating that the law was applied to them so why not to decentralized cryptocurrencies now.

2. That there are 500 cryptocurrencies so the law is broad so that they cover them all.

Both statements are false or misleading, as we will see later.

From: Rahapesu
To: Otto de Voogd
Date: Wed, 18 Feb 2015 08:33:14 +0200
Subject: RE: Teabenõue
Tere!

Edastan vastuse.

Lugupidamisega

Kulla Ojala
Rahapesu andmebüroo juhtivspetsialist


Otto de Voogd

Your ref: 10.02.2015
Our ref: 17.02.2015 no 3.4-3/2-7

Estonian FIU is on opinion that all cryptocurrencies (both centralized and de-centralized) are
covered by definition of provider of services of alternative means:

Money Laundering and Terrorist Financing Prevention Act § 6 - 4 states that „A provider of
services of alternative means of payment is a person who in its economic or professional
activities and through a communications, transfer or clearing system buys, sells or mediates
funds of monetary value by which financial obligations can be performed or which can be
exchanged for an official currency, but who is not a person specified in subsection (1) or a
financial institution for the purposes of the Credit Institutions Act.“
This definition is enacted in the Law since 28.01.2008.

All activities which meet given definition are treated similar way. By our opinion there is no
need to introduce list of different cryptocurrencies and/or other services which fall under this
definition as definition is broad enough. Centralized cryptocurrencies did exist before this
amendment in Law was introduced. We do not see any reason that de-centralized
cryptocurrencies are not covered by given definition and should be treated in some other way.
Broad definition also ensures that all new similar products/services are covered by the Law as
similar new alternative payment means are introduced almost every week and total number of
those is already exceeding 500. Also by our information many countries have started to issue
guidelines/regulations to regulate service providers of cryptocurrencies.

Yours sincerely

Aivar Paul
Head of Estonian FIU

372 [snip] [snip]@politsei.ee

Thus I decided to contradict his statements.

From: Otto de Voogd
To: Rahapesu
Sent: Wednesday, February 18, 2015 14:42
Subject: Re: Teabenõue
Dear Mr Paul,

Thank you for your answer.

I am not aware of any *centralized* cryptocurrencies that existed before 28.01.2008. Please kindly provide me with some examples of such centralized cryptocurrencies.

Furthermore I have to take issue with your statement that ALL cryptocurrencies fall under the definition provided by the law.

The crucial part of the law states that it applies only to "funds of monetary value by which financial obligations can be performed or which can be exchanged for an official currency".

In fact the vast majority of cryptocurrencies can not be used to perform financial obligations nor exchanged into official currency.

As a matter of fact Litecoin can not be used to perform financial obligations in Estonia nor exchanged for official currency anywhere in Estonia.

You may argue that it is possible outside of Estonia, but generally the law only covers activities in the jurisdiction where that law applies.

But regardless we can put that argument aside, as there are many other cryptocurrencies that can not be used to perform financial obligations anywhere in the world, and can not be exchanged for official currency anywhere in the world.

In my understanding of the law that you quoted those cryptocurrencies clearly do not fall under the definition provided by that law and are therefor NOT alternative means of payment.

As it is your duty to provide clarity to the citizens of Estonia, you must perform an analysis of each cryptocurrency individually in order to determine if they meet the criteria to be classified as an alternative means of payment in Estonia.

Here is a short list of cryptocurrencies for which I'd like to know if they meet the criteria of being "funds of monetary value by which financial obligations can be performed or which can be exchanged for an official currency". In case they are please provide proof in the form of an example of a financial obligation that can be performed or a where they can be exchanged for official currency.

Dogecoin
Namecoin
Darkcoin
Monero
Feathercoin
Primecoin
Peercoin
Clam
Coinye
Auroracoin
Powercoin
Startcoin

I look forward to your clarifications.

Regards,
Otto de Voogd

Next Aivar Paul admits that indeed all cryptocurrencies are not necessarily alternative means of payment under Estonian law. Thus negating his earlier claim that the law was broad so as to cover them all.

From: Rahapesu
To: Otto de Voogd
Subject: RE: Teabenõue
Date: Mon, 23 Feb 2015 14:44:41 +0200
Mr. De Voogd.

One example of centralized cryptocurrency: http://en.wikipedia.org/wiki/DigiCash . 

We agree that cryptocurrency has to meet criterias to be a subject of law. Not all ***coins are automatically cryptocurrencies as well. To be a "currency" means that it has to have some value. As it is stipulated in MLTFPA "A provider of services of alternative means of payment is a person who in its economic or professional activities and through a communications, transfer or clearing system buys, sells or mediates funds of monetary value by which financial obligations can be performed or which can be exchanged for an official currency"

Estonian FIU has supervisory duties over wide range of entities and not all of them are listed in some sort of obliged entities list. If the service (or area of activity) indicates that person could fall under Estonian regulation and be subject of MLTFPA then Estonian FIU initiates supervisory action with first step to recognize is the person subject of regulations or not. For example NPO`s are subjects of MTLFPA only when they in their activities accept cash over 15000 euros. So for step with NPO`s would be gathering relevant information in order to detect is monetary value criteria set in Law met or not.

We will assess different providers of cryptocurrencies if there is such need in place. If there is information that somebody trading for example dogecoins (first in your list) then we will look into activities of provider and then we will look does dogecoin provider meet criterias of alternative mean of payment and does activity and person fall under "service provider" definition. There is no current need to do that now, but first glimpse demonstrates that it potentially could fall under alternative mean of payment as by information given in Wikipedia hints that it potentially has monetary value http://en.wikipedia.org/wiki/Dogecoin#Use_and_exchanges .

Regards
Aivar Paul
Head of Estonian FIU

Obviously Aivar Paul is unable to answer my next question as there was no centralized cryptocurrency to which the 2008 law was ever applied. And thus Mr. Aivar Paul's claim that he often makes in public, that the law should apply to decentralized cryptocurrencies as it did to centralized cryptocurrencies is simply misleading as there were no centralized cryptocurrencies it was ever applied to.

From: Otto de Voogd
To: Rahapesu
Date: Sat, 28 Feb 2015 08:52:08 +0100
Subject: Re: Teabenõue
Dear Mr. Paul,

Digicash ceased to exist in 1998. The Estonian law dates from 2008. I
think it's pretty safe to assume that the 2008 law was not made to apply
to Digicash, and in fact never applied to it.

So let me reformulate the question: do you have any example of a centralized
cryptocurrency to which the 2008 law was ever applied?

Regards,
Otto de Voogd

Followed by... silence...

If I could draw a conclusion, I'd say the Estonian FIU's analysis of the relevant laws was rather unprofessional. Coming out with grand claims that all cryptocurrencies are covered by the law when they are clearly not. It should be embarassing that someone with no legal background, like myself, can point out such an obvious flaw in the reasoning of an organization tasked with enforcing the law.

It furthermore underlines the fact that no proper analysis was ever made by a team of real experts.