The Blockchain Act is finally approved. The law will be put into force in January 2020 and will introduce a legal framework for the token economy.
Liechtenstein has received international attention over the past two years for its Blockchain Act – the first attempt worldwide to create a legal framework for a functional token economy. The law had been in the making for years and Liechtenstein’s parliament had approved it in the first hearing on 6th June 2019.
Yesterday, the parliament finally approved it in a second hearing, which means it will become binding law in Liechtenstein. Not a single member of parliament has voted against the bill, showing a clear consensus among lawmakers that blockchain has enormous potential for the nation’s future.
Token-Container Model defines “token” as a legal term
The Blockchain Act allows every possible asset, including real estate, bonds and securities, to be tokenized, digitalized and listed on a cryptocurrency exchange. The legislation also specifically regulates
- the ownership of digital assets,
- the transfer of ownership of digital assets,
- the safe storage of digital assets,
- legal requirements for the storage of digital assets,
- several levels of licensing for business providers in the token economy,
- as well as Security Token Offerings, Initial Coin Offerings, Token Sales and Token Generation Events.
Dr. Günther Dobrauz, from PwC Legal Switzerland, explains, “The government has decided to regulate not only current Blockchain applications but also to establish a legal basis for the entire scope of application of the token economy according to a long-term approach, which should also meet the needs of future generations.”
A key aspect of the law is the so-called “token-container” model, which defines a token as a vehicle that can include any right, for example ownership rights, voting rights, rights to dividends, etc. The law states that the disposal over the token results in the disposal over the right contained in the token. Naegele Attorneys at Law have visualized the token-container model in the following infographic:
Industry leaders are in favor of the law
Liechtenstein’s blockchain leaders expressed positive views on the new law. Frank Wagner, CEO of Liechtenstein-based Blockchain Investment Manager INVAO, says, “Businesses and investors need legal certainty and a regulated environment. Tokenization has great potential for the future of financial markets, but it needs a clear regulatory framework that gives investors confidence to invest in the technology.”
Smart Valor CEO Olga Feldmeier called Liechtenstein’s leadership “impressive visionaries and great leaders” and said yesterday was a “big victory for the cryptocurrency and blockchain industry.” Smart Valor is set “to be one of main beneficiaries of this regulatory process, making tokenization of real assets reality.”
Mauro Casellini, CEO at Bitcoin Suisse (Liechtenstein) AG, says, „The fact that the Liechtenstein parliament has unanimously approved the law shows lawmakers perceive the Blockchain Act as important. The law creates not only legal certainty for all market participants but also marks the launch of a new era, the era of the token economy. Being a pioneer, Liechtenstein proved once more that it is the ideal location for Fintech and blockchain companies.”
Prof. Dr. Philipp Sandner, from the Blockchain Center at Frankfurt School of Finance, points out the international sigificance of the law, “So far, many details of the Blockchain Act and its implications are not widely understood. However, once the law comes into effect on January 2020, and folks start to understand the opportunity, Liechtenstein could become a real enabler of the token economy.”