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Local Currency and Capital Markets Initiative: Opening the Estonian Legal and Regulatory Framework for Innovative Technical Solutions


Estonia, 06 June 2018

Project Description:

The Ministry of Finance of the Republic of Estonia (MoF) (the Client) has requested the European Bank for Reconstruction and Development (the EBRD or the Bank) to provide technical assistance for the Opening the Estonian Legal and Regulatory Framework for Innovative Technical Solutions (the Project).

Estonia has been focused on promoting innovation for many years through its "e-Estonia" movement, growing from public sector and now into the private sector. The country is now trying to improve the efficiency and accessibility of its financial markets through the implementation of innovative technological solutions or FinTech.

Under the initiative of "e-Estonia", Estonia has progressed extensively further than other member states in terms of innovation intensity. Product innovation and the digital economy are encouraged through various policy initiatives, particularly in the public sector (e-government, public health system). While the country boasts a world-renowned innovative start-up sector, broader performance in innovation and productivity growth has not been adequate to address these longer term challenges. The country's economy comprises a large small and medium-sized enterprise ("SME") sector, while many of its larger corporates choose to list themselves on overseas markets rather than the local Tallinn Stock Exchange ("TSE").

In order to continue direct and simplified SMEs access to the capital market, it is important to continue to improve the efficiency and the attractiveness of financial markets by using innovative technology.

In this context, Estonia has requested support from the European Commission under Regulation (EU) 2017/825 on the establishment of the Structural Reform Support Programme ("SRSP Regulation"). The request has been analysed by the European Commission in accordance with the criteria and principles referred to in Article 7(2) of the SRSP Regulation, following which the European Commission has agreed to provide technical support to Estonia, together with the EBRD.

In this context, the MoF would like to closely cooperate with the European Commission and EBRD to develop the Project, as such framework, in a long term period, will be beneficial to other EU members as well by giving them the empirical data of the alternative, more efficient market infrastructure of SME's.

Assignment Description:

The overall objective of the project is to support the development of the capital market in Estonia in the frame of the CMU. The project aims to

a) Analyse the Estonian legal and regulatory framework and outline the main areas that require improvement for the purpose of implementing innovative technology;

b) Create a live testing environment or 'sandbox' to test the technology and FinTech companies against regulation, and risk conduct standards which could subsequently lead to development of new regulation or amendments to the existing standards and aims to:

  • Reduce the time and cost of introducing innovative technologies into the Estonian market;

  • Promote greater access to financing for innovative start-ups and companies by reducing regulatory impediments;

  • Introduce a higher volume of innovative technologies into the market;

  • Ensure that consumer safeguards are built into new products and services by allowing EFSA to work with innovative companies in a well-defined 'testing' environment;

c) Provide recommendations for legislative reform on national level and improvements to risk conduct guidelines.

The Bank now intends to engage a consulting company or a group of companies (the Consultant), under the SRSP-LC2 Framework to assist and support the MoF with the following services/activities (the Assignment):

  • A preliminary design report

  • Implementation Support

  • Preparation of report detailing the results of the testing and outlining recommendations for regulatory and risk reforms to enable the use of technological innovation

View the ECN Procurement Notice (This notice is visible only to ECN Executive and Expert Members: Please login to view).

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