The Baltic region has been noted for its high output of tech start-ups over the last few years. Now the focus of these companies is increasingly turning towards the digital currency sector.

While much of Europe struggled through low economic productivity following the global financial crisis, the Baltic region was one of the fastest to bounce back when measured in terms of entrepreneurship and innovation. In Estonia, 14,000 new enterprises registered in 2011, a 40% increase over 2008, a number demonstrating the strong determination-to-succeed that has driven the region's reputation as a tech hub.

Looking at previous success stories from the region, one of the biggest headlines is the group of coders responsible for the origins of Skype. Examining the tech scene in 2014, The Economist explained how the status of these innovators now serves to inspire a whole new wave of entrepreneurs.

“A big influence is Skype. The internet-telephony company (now part of Microsoft) runs on software written by four Estonians and has its headquarters in the capital, Tallinn. Daniel Vaarik, a local tech guru, says the founders “look like rock stars” to Estonians and inspire imitation.”

Having been a leading force behind previous technologies, such as the Voice Over Internet Protocol, this pool of developers, entrepreneurs and tech talents is now increasingly turning its attention towards the digital currency sector.

Cointelegraph spoke to Alexandr Gromov from Estonian-based cloudmining service Hashflare about what he thinks has led to the region's strong position in the sector, and how that is beginning to be seen on the ground in the lives of these developers.

“With regard to technologically-advanced Estonia, it is logical that we have a rapidly developing Bitcoin industry, because here had the world’s first parliamentary e-elections, fully digital taxation and e-health systems. Besides, you can quickly and easily establish your company on the Internet in a matter of minutes.” [...] “The Bitcoin ecosystem in the Baltics is currently in its infancy stage, but despite this, cryptocurrencies are still gaining popularity. As far as we know, a number of retailers and service providers have started accepting Bitcoins as a form of payment for goods and services, starting with the purchase of tickets and payment of legal services, ending with ordering a cup of coffee.”

This relatively large number of services accepting Bitcoin as a payment could be seen to be one of the factors driving the sector. As more individuals are exposed to digital currencies in this way, it must lead to greater interest from the public, and more space to implement and test tech projects.

Latvian airline AirBaltic made the headlines back in August 2014 when it announced it was to become the first airline to accept Bitcoin payments, offering a high-level example of an often much more local trend.

The future of digital currency tech companies in the region is not necessarily guaranteed, however. One problem now facing digital currency start-ups in Estonia at least is the 2014 decision to apply 20% VAT to Bitcoin transactions. We asked Gromov how this regulatory change had affected their prospects.

“To be honest, we did not notice much of a difference. For us Bitcoin is a currency just as euros, dollars or rubles. You can use it to get services and/or goods. Since transactions with fiat money are taxed, why not equalize cryptocurrency. Everything is fair, at least until such decisions apply only to legal entities.”

Just across the Gulf of Finland from these Baltic tech states, Finland has taken a different stance on the question of how to apply VAT to digital currency transactions. By zero-rating the tokens for transactions, Finland has created an economic environment that could begin drawing in tech start-ups from the region, as they look to benefit from this low-tax situation.

This entire question of taxation however is soon to be settled at the European level. Following an application by the Swedish tax authorities, European regulators will soon decide whether it is appropriate to tax digital currency transactions.

If this decision goes against Finland's position, and falls more in-line with Estonia’s, the start-ups built and developed there could receive an additional boost as they are already built on models incorporating and accepting that this taxation will take place.

Regardless of the regulatory situation however, we returned to Gromov to ask how he saw the future developing for the region.

“Based on the foregoing, we can confidently answer - potential for development of cryptocurrencies in the Baltic countries is definitely here. More and more people learn about e-currency, and even try to use it in practice.”

The high level of interest in digital currencies and general good reputation in the tech start-up world means that the Baltic states look set to grow in digital currency power. We should expect to see many more examples of strong new concepts and companies emerging from an environment where digital currencies appear to be an established part of the future.