Liechtenstein’s Blockchain Act marks a milestone for the Blockchain industry, as it aims at creating a legal framework for the use and trading of digital assets. The new legislation will not only strengthen Liechtenstein’s position as the European crypto hub, but could have implications way beyond the country’s borders.
When asked about the new Blockchain Act, Liechtenstein’s Prime Minister Adrian Hasler explained that the law is “designed to serve as the legislative basis for a token economy and thereby provides regulatory certainty for all participants.”
These words are music to the ears of Europe’s blockchain community. Legal uncertainty and the infancy of blockchain regulation are still major roadblocks for the industry’s development. Therefore, Liechtenstein’s government has drafted the Blockchain Act with the goal of positioning the country as the number one blockchain hub in Europe. And indeed, the blockchain community is looking forward to the proposed regulation with great enthusiasm.
The Blockchain Act will create a legal framework for the digital economy
The Ministry for General Government Affairs and Finance has published a consultation report on the 28th of August, and the new law is expected to be put in force by early 2019. It is designed to create a regulatory environment in which blockchain companies and investors can operate with greater legal certainty. Thus, the main purpose of the law is to protect users and increase confidence in the industry, without making blockchain companies subject to undue limiting restrictions. The main innovations of the act are:
Determination of ownership rights and transfer of ownership
The Blockchain Act will regulate the tokenization, thus the digitalization and listing, of every possible asset. As a result, ownership rights can be obtained and transferred more easily via crypto exchanges. In expectation of the proposed legislation, the Liechtenstein Cyptoassets Exchange (LCX) is currently being set up, which will be the first crypto exchange for professional traders in Liechtenstein.
Legal framework for STO, ICO and TGE
The new law will provide legal ground for STO (Security Token Offerings), ICO (Initial Coin Offerings) and TGE (Token Generation Events). The objective is to make it easier for companies to obtain financing without having to go through traditional financing vehicles such as IPOs.
Licensing and business registration
In future, companies providing services in the digital economy will have to obtain a license and register with the Financial Market Authority (FMA). The legal requirements are defined in the act – companies must have internal control mechanisms, a clear organizational structure and a minimum capital of CHF 100,000.
Businesses that are providing storage services must comply to certain requirements that aim at improving the security of storage and lower the risks of wallets being hacked. The government tries to establish an industry standard that will provide more confidence in the industry’s technological security.
The Blockchain Act will position Liechtenstein as Europe’s crypto hub
Already today, Liechtenstein has excellent prerequisites to become the frontrunner of Europe’s Blockchain industry. The country is a member of the European Economic Area (EEA), but not of the European Union. Therefore, companies based in Liechtenstein can operate across the entire continent, without having to comply to restrictive EU regulations.
The Blockchain Act will enable blockchain businesses to integrate into the traditional economy more smoothly, by creating a lawful connection to the physical world. A clear and transparent legal standard for the industry will give Liechtenstein an edge over alternative locations such as Gibraltar, Singapore, Bermuda or Cayman.
The implications of the Blockchain Act could go beyond Liechtenstein’s borders. Once successfully implemented in Liechtenstein, other countries may follow the example and introduce similar legislation. The Blockchain Act could therefore be one small step for Liechtenstein, but one giant leap for the blockchain economy.
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