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Liechtenstein Parliament Approves Blockchain Act

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Liechtenstein Parliament Approves Blockchain Act

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Following the second and final reading yesterday (3 October 2019), the Parliament of Liechtenstein unanimously passed the new Blockchain Act (“Token and TT Service Provider Act”), which will be in force from 1 January 2020.

With the new Blockchain Act, named Tokens and Trustworthy Technology Service Providers Act (shortly; “Token and TT Service Provider Act” or “TVTG”), Liechtenstein is the first country in the world regulating blockchain-based products in general, providing legal certainty and security as well as customer protection.

Prime Minister Adrian Hasler: “With the TVTG, an essential element of the government’s financial market strategy will be implemented and Liechtenstein will be positioned as an innovative and legally secure location for providers in the token economy.”

Liechtenstein has always been a country welcoming business based on blockchain and cryptocurrency. With the new Blockchain Act, Liechtenstein sets a standard for a broad scope of applications based on blockchain. Other than creating, exchanging and dealing with cryptocurrencies, the Liechtenstein Blockchain Act is a legal and regulatory framework for the token-economy with a holistic approach. This broad approach makes the Liechtenstein Blockchain Act the first in the world of its kind.

Other than “cryptocurrency legislation” in other countries, the Liechtenstein Blockchain Act focuses on the underlying concepts instead of applications. The Act regulates the tokenisation and digitalisation of any possible asset, such as real estate, patent rights, precious metals, bonds and securities, as well as the listing of tokenised assets on a cryptocurrency exchanges. The legislation also specifically provides for regulations regarding:

  • the ownership and its transfer of digital assets (i.e., tokens);
  • the safe storage of digital assets and its legal requirements;
  • several levels of licensing for business providers in the token economy; and
  • Security Token Offerings (STO’s), Initial Coin Offerings (ICO’s), Token Sales and Token Generation Events (TGE’s), setting up of exchanges.

Taking into account the pace of technological development, the lawmakers of Liechtenstein did show a very progressive and forward-looking approach by not limiting the scope of the law to blockchain, but instead using the term “transaction systems based on trusted technologies (VT systems)”. This approach will keep the Act future-proof and making it valid for upcoming generations of technologies.

An important advantage of Liechtenstein as the jurisdiction of choice for blockchain-based or cryptocurrency business is EU-Passporting of the licence issued by Liechtenstein, an advantage that, for example, Zug in Switzerland is not able to provide.

In its press release prior to the first reading of the Token and TT Service Provider Act, the government of Liechtenstein said;

  • “Because of the rapid pace of development of blockchain technology and its areas of application, it is very important to draft a law abstractly enough to ensure that it remains applicable for subsequent technology generations.”
  • “The goal is to ensure that a new law does not have to be created for every case of application, but also to create legal certainty for the many cases which are only just beginning to emerge in practice and are likely to develop in the near future. However, the Government is leaving open the option of regulating applications close to the financial market in a further step.”

Crown Prince Alois implied in February 2018 that his royal family could soon use blockchain to manage the day-to-day administration of their monarchy, and he’s made mention of diversifying his family’s assets into digital tokens.

Some banks in Liechtenstein are already accepting companies with business lines related to cryptocurrencies, under the condition of full compliance transparencies, and LGT, Liechtenstein’s largest bank and owned by the private foundation of the Prince’s family, is preparing to release its own cryptocurrency.

Tokenising Assets – Our Support and Services

Based on the application of current legislation in Liechtenstein and based on the new Token and TT Service Provider Act, the tokenisation of assets might be realised in different ways. The different ways to determine the legal nature of tokens, the kind of licencing required (if any) and their regulatory treatment.

When a client wishes to establish blockchain-based business in Liechtenstein, we apply a holistic approach to the entire project and its details, ensuring tailor-made solutions for our clients’ project and their right implementation, starting with the discussion and drafting of an initial roadmap, presenting all options, such as main steps, risks and possible concerns, documents needed and detailed budgets.

Shanda Consult and its associates in Liechtenstein are well experienced in licencing procedures with the Financial Market Authority of Liechtenstein as well as with Liechtenstein banks that do accept clients with blockchain-based or cryptocurrency business.

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