Liechtenstein adapts blockchain laws to developing crypto landscape

The blockchain and crypto manufacture is perpetually increasing and changing astir the world, and the Principality of Liechtenstein is nary exception. 

The sixth smallest state successful the world, located successful the mediate of Europe betwixt Switzerland and Austria, has attracted the attraction of the planetary and European crypto communities alike since the aboriginal days of the industry. 

In 2019, Liechtenstein became 1 of the archetypal countries successful the world to follow circumstantial authorities connected crypto and blockchain, namely the Token and Trusted Technology Service Providers Act (also known arsenic TVTG oregon the Liechtenstein Blockchain Act), which has been successful unit since the opening of 2020 and established 1 of the world’s archetypal regulated environments for token-related services.

Since 2020, the fig of crypto work providers successful Liechtenstein has been increasing, arsenic companies find optimal conditions determination to found and make their crypto business. The TVTG’s precocious level of regulatory certainty and nonstop connection with the section fiscal marketplace regulator, the Financial Market Authority (FMA), person besides contributed to this crypto-friendly environment.

What other makes Liechtenstein peculiar and charismatic for crypto work providers? Will the upcoming Markets successful Crypto-Assets (MiCA) regularisation beryllium compatible with Liechtenstein’s Blockchain Act? Or is Liechtenstein’s authorities readying to tighten the instrumentality aft the collapse of large crypto businesses similar FTX, Celsius oregon Three Arrows Capital?

To get a betting knowing of crypto’s aboriginal successful the country, Cointelegraph sat down with Thomas Dünser, manager of Liechtenstein’s Office for Financial Market Innovation and Digitization. Dünser is simply a elder advisor to the premier curate of Liechtenstein, liable for innovation and digitalization issues wrong the Ministry of Finance and was the task person and co-author of the Blockchain Act.

The archetypal broad nationalist token law

From 2016 to 2018, the blockchain and crypto manufacture faced a tremendous magnitude of uncertainty arsenic governments astir the satellite had lone begun to make regulatory concepts for integer assets. Amid this uncertainty, the announcement that the Liechtenstein authorities considered blockchain arsenic a promising exertion was already thing of a sensation.

With the publication of the draught law, it besides became wide however Liechtenstein would dainty tokens. In particular, Liechtenstein was the archetypal state successful the satellite to modulate the token arsenic a ineligible instrumentality with the Token Container Model (TCM) and to classify tokens otherwise based connected however they relation (utility token, information token oregon outgo token).

According to Dünser, this clarification unsocial that not each tokens are to beryllium considered fiscal instruments has triggered “enormous affirmative feedback” from the manufacture and created “greater ineligible certainty” successful the exertion of fiscal marketplace laws.

He explained that the explanation of the token, the regularisation of ownership and possession of the token, and the delegation and transportation rules person not lone clarified basal ineligible issues but person besides “laid the groundwork for the usage of tokens by established fiscal institutions” similar custody services, banks oregon exchanges. Moreover, Dünser emphasized the value of the “semantics” of the Blockchain Law:

“It created a communal connection space, which was important for method and regulatory discussions astir crypto and blockchain betwixt authorities and marketplace participants.”

The quality to innovate is critical

The Blockchain Act was designed successful 2016 and passed backmost successful 2019. At that time, determination were nary decentralized concern applications oregon nonfungible tokens (NFTs) connected a standard similar now, which calls for faster ineligible development.

How is Liechtenstein dealing with this standard of innovation?

— BFG Blockchain Founders Group AG (@bcfounders) February 22, 2022

Neither the inclination toward decentralization nor toward NFTs was unexpected, said Dünser. “With our nationalist token law, we person created the ground for a wide scope of tokenizations, adjacent going beyond NFTs. We person deliberately tried to deliberation acold beyond the existent usage cases of blockchain successful our legislation. So, I don’t expect that we volition person to re-regulate present anytime soon.”

Liechtenstein regulators person besides taken the inclination of decentralization into relationship successful the Blockchain Act. The TVTG is “open for innovation” and flexible, “principle- and role-based — arsenic a counter-model to the different accustomed rule- and concern model-based regulation” and “technology-neutral.”

In the Blockchain Act, activities are taxable to regulatory requirements if they airs risks to users, careless of the concern exemplary successful which they are provided. In doing so, work providers themselves person to see however to mitigate the risks, whether with exertion oregon quality resources. Dünser said:

“Given the accelerated gait of technology-driven innovation, the quality of the ineligible strategy to innovate is critical. Without it, we not lone dilatory down innovation but besides look sizeable ineligible uncertainty. Neither of these tin beryllium successful the involvement of states.”

In Liechtenstein, regulators have, therefore, established an innovation model with the aforementioned authorities innovation process and the Regulatory Laboratory astatine the FMA. In Dünser’s view, it has proven to beryllium “very successful”; however, since the important fiscal marketplace laws successful the European Economic Area are defined astatine the European level, analogous structures would beryllium indispensable for the full determination regulatory system.

Similarities betwixt the TVTG and MiCA

MiCA is an important measurement toward a unified European regulatory system, and the TVTG served arsenic a benignant of exemplary for MiCA. In particular, the MiCA draught adopts the Token Container Model of the TVTG, the licensing request for offering definite blockchain-related services, and besides the accusation requirements for nationalist offerings.

So, determination shouldn’t beryllium immoderate large changes to the existing signifier successful Liechtenstein aft MiCA enters into force, and some laws volition beryllium well-compatible, noted Dünser.

Crypto work providers recently regulated nether MiCA volition nary longer request to beryllium regulated nether the Blockchain Act.

“Like Liechtenstein, the EU Commission sees the token system — successful summation to fiscal marketplace applications — arsenic a large accidental for Europe.”

Liechtenstein’s experiences were, therefore, applicable for European lawmakers, and determination were “lively discussions” betwixt some sides that are reflected successful galore regulatory philosophical similarities betwixt the TVTG and MiCA: the token instrumentality model, the role-based and, to immoderate extent, principle-based regulation, and openness to innovation.

“However, we request to separate betwixt the civilian instrumentality and supervisory instrumentality parts,” Dünser noted, adding, “MiCA includes lone the prudential components. Each subordinate authorities has to clarify the civilian instrumentality foundations itself. With the Blockchain Act, Liechtenstein already has a broad and robust ineligible model for each types of tokenization, from equity tokens, and different crypto assets to NFT and different tokenized rights.”

“We are prepared to act”

As to whether Liechtenstein volition tighten rules for the crypto marketplace aft the FTX clang and different large collapses successful 2022, Dünser said it would amended debar overregulation. Moreover, the Blockchain Act already regulates the custody of tokens and besides prescribed ineligible separation successful the lawsuit of bankruptcy.

Nevertheless, Dünser agreed that definite adjustments are necessary. “I spot greater challenges successful staking oregon borrowing and lending of lawsuit tokens by crypto exchanges, which is not regulated successful galore jurisdictions.”

In the European Union, for example, regularisation for recognition institutions, which is acceptable up for akin activities involving money, does not use to crypto work providers. MiCA besides does not screen this issue, astatine slightest not yet.

“In my view, this regulatory spread should beryllium closed urgently. We are pursuing and monitoring this improvement intimately and are besides prepared to act.”