I was at a dinner meeting near the Arctic Circle recently, sitting at a table of inter­national business leaders, and the conver­sation quickly focused on Estonia--its ultra-high literacy rate, majority female population, and famous Singing Revolution of 1991, when citizens staged mass protests and broke away from the Soviet Union, all while chanting patriotic hymns. I was smitten.

"Apply for residency," the Estonians said, insisting I'd love their local wines. I explained that while political insanity had reached fever pitch in the U.S., I wasn't quite ready to leave America. "You don't have to," they told me. "You can be one of our digital residents."

Estonia is one of the countries testing e-residency. This could mean big opportunities for small businesses that want to hire workers away from home, maybe even doing for Estonia what ultra-low corporate tax rates did for Ireland. E-residency could also help create new business communities that will define themselves by how "smart" they are, through the use of new technologies for automation, security, grid management, and more, or how "human" they are, by providing internet-free zones and the right to digital invisibility.

Estonia began this project 15 years ago, when it moved most of its government operations online, thus changing the way citizens access medical records, file their taxes, and comply with regulations. People would eventually be able to use their smartphones to handle tasks ranging from voting to managing health care. They would also have control of their own data, deciding who can access their profiles and information.

Then, in 2014, the Baltic state piloted e-residency to attract entrepreneurs and tech talent. Dubbing itself the new digital nation, Estonia let people gain a virtual E.U. presence for their businesses without actually living there. Management consultants, web designers, and other digital entrepreneurs could then get financial benefits, such as tax breaks, along with the prestige of having an E.U.-hosted company.

The program has since brought 6,000 companies to Estonia and enrolled more than 61,000 e-residents, including more than 3,000 from the U.S. Estonia has also netted a reported $15 million in taxes from those in the program. The application--which involves filling out a short form, submitting a "motivation statement," completing a background check, and paying 100 euros--is entirely online. E-residency doesn't confer the right to a physical presence in the country, but people can apply to have a legal address there and designate a local contact person.

The system hasn't worked flawlessly. Some have used e-residency to run scams from abroad. A person from India, for instance, created a fake university in Estonia that awarded fake diplomas. Estonia is now working to tighten security.

The technology that enables e-residency can have a dark side, too, with some countries using it to surveil people at home. In China, as of December 1, all citizens will need to scan their faces to sign up for internet service. An Orwellian monitoring system uses digital tools to assign scores to citizens--awarding points for a "heroic act" or deducting them for blowing through a traffic light. Scores allow or prohibit some Chinese citizens to do things like buy air tickets or qualify for promotions at work. In Venezuela, at least 15 million citizens are believed to have received a Carnet de la Patria, or a Fatherland Card, which they need to access government services, pensions, and food stamps. The card also reportedly tracks voting records and party registration.

Estonia shows us the promise of digital residency, and how the technology could usher in a new age of innovation and improved public services--at least in nations that protect individual rights. For anyone hoping to do business abroad through an e-residency program, now is a good time to develop a data strategy. Each country governs how companies there collect, store, commercialize, and share data--which means compliance can be tricky and expensive. Yet there's plenty of opportunity on the horizon. One day, your company could become a multi­national without your ever having to leave home.

From the Winter 2019/2020 issue of Inc. Magazine