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Liechtenstein - blockchain & cryptocurrency regulations review

author: adv. Justyna Bartoszek

Liechtenstein favors entities focusing their activities on blockchain technology. Together with many Swiss cantons (which we discussed last week:ń-regulacyjne-dla-cryptowalut) it is referred to as part of the European Crypto Valley. It was Liechtenstein, as the first country in the world, that adopted a regulation dedicated to tokenization, i.e. the so-called Liechtenstein Blockchain Act (“TVTG”).

Regulatory activity in Liechtenstein is focused on providing legal certainty to all entities relying on blockchain technology and cryptography. Accordingly, the Liechtenstein Financial Market Authority (“FMA”) is actively facilitating the development and adoption of decentralized technologies, while introducing national licensing requirements for certain activities.

The passing of the TVTG has created one of the world's first regulated environments for token-related services. TVTG has established rules for asset tokenization, due diligence requirements, KYC and AML, as well as licensing and registration procedures for various blockchain and crypto-based assets.

TVTG introduces the legal definition of Trustworthy Technology Service Provider ("TT Service Provider") along with the licensing requirements. This definition includes all entities that perform any operations on cryptocurrencies, tokens or possible future financial technologies. TT Service Providers must be registered with the FMA and obtain registration for all kinds of operations, from issuing tokens and processing cryptocurrency payments to physical validation of tokenized assets.

It is worth noting that TVTG adopts the "token container model", which means that the token can represent rights to all possible assets, without any restrictions. The above means that if financial instruments are actually tokenized, then the token will also be classified as a financial instrument. At the same time, the use of cryptocurrencies as a means of payment has not been regulated in Liechtenstein.

In addition to a clear legal framework, an advantage for entities based on decentralized technologies is the active support provided to projects by the FMA. An entity planning to start a business may contact the regulator in advance and receive feedback about which licenses and requirements apply to the project. The FMA has also a dedicated FinTech Desk responsible for regulating cryptocurrencies and blockchain, as well as regulating any future financial technology. The open and direct attitude of local authorities is particularly attractive to start-ups and has attracted many founders.

Liechtenstein and TVTG enables the tokenization of all types of assets and rights, without the need to circumvent the law and fear of possible delegalization of the actions taken. The act was intended to improve the country's ability to legally host digital tokens. As a result, blockchain entrepreneurs and digital technology enthusiasts are eager to set up their entities in Liechtenstein.

Liechtenstein's legal environment makes it a particularly attractive jurisdiction for medium to large projects based on blockchain technology. Legal certainty is paramount to them, and strict licensing rules are less of a problem for large companies than for startups. At the same time, startups, depending on the type of activity and the planned development path, may consider legal certainty as an important reason for choosing Liechtenstein as the so-called base jurisdiction.


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