Patrick Bont, Head of Banking at the FMA (Financial Market Authority) and part of the Executive Board, talks about his work in financial market supervision and what he has to do with blockchain companies.

Ramona: You have been with the FMA since summer 2009. What are your exact functions there?

Patrick: As a member of the Executive Board, I am initially responsible for the Banks division. In addition, I work on various topics and projects related to digitization. These include, for example, regulatory developments in the FinTech sector or the digitization strategy of the FMA.

Ramona: Are you also personally interested in Blockchain and ICOs?

Patrick: I also deal with these topics privately. The digital transformation of the economy and society are highly exciting developments. I want to understand what is happening and read a lot about these topics or take part in events.

Ramona: Blockchain and ICOs are on everyone’s lips at the moment. But very few people can really explain the terms. Can you briefly explain the two terms?

Patrick: Blockchain technology is simply about keeping decentralized accounting in a network. There is not one central office that controls and updates all bookings, but many copies of this bookkeeping. These are managed quasi simultaneously and can be viewed and traced by all participants in this network. Therefore, the blockchain is also very secure. An attacker would have to forge all copies at the same time. The abbreviation ICO stands for Initial Coin Offering. With an ICO, so-called tokens, a kind of an electronic voucher, are issued against a crypto currency on the basis of blockchain technology. In the last two years, numerous start-ups have been financed in this way.

Ramona: The FMA has been dealing with blockchain for some time now. How did the whole thing start and what was your first ICO to take care of?

Patrick: We received the first inquiries from the market about three years ago. Companies wanted to know how crypto currencies are to be classified under financial market law and whether there are any regulations. Soon after, we were contacted with questions about ICOs. So we had to deal with these issues and analyse what the legal framework was. The first ICO in Lichtenstein was then carried out by aeternity in spring 2017.

Ramona: To what extent will blockchain technology change the financial world in the next few years?

Patrick: It can be assumed that this technology will change the financial world quite a bit. Especially in areas where a lot of intermediaries have been involved in a transaction so far. For example, in securities trading. There, processes will be simplified, faster and also cheaper. This is one of the reasons why many large stock exchanges are investing in technology.

Ramona: How must the FMA adapt to these changes?

Patrick: On the one hand, the FMA needs to build and develop internal expertise to assess the impact and risks of these changes and technologies. On the other hand, many detailed questions arise in the legal assessment of e.g. crypto exchanges or the issue of different types of tokens in an ICO. These questions also depend on how EU regulation evolves.

Ramona: What exactly can the FMA regulate for ICOs?

Patrick: It depends a lot on the ICO. There are ICOs that issue so-called utility tokens. In other words, electronic vouchers that later entitle the holder to purchase a product, for example. Such an ICO is usually not subject to financial market legislation. In the case of ICOs in which shares in the company are issued in the form of tokens, it is possible, however, that approval from the FMA is required. It is therefore a case by case assessment.

Ramona: Does a decentralised blockchain lose its meaning if it is centralised again by the Blockchain Act? How do these two aspects fit together? And why do we need regulations?

Patrick: The Blockchain Act does not regulate the blockchain itself, but providers of services on the basis of technology. This does not centralise the blockchain, but of course a service provider, e.g. a crypto exchange, can be regulated and supervised. This serves to protect the investors or customers of such a provider.

Ramona: How many inquiries did the FMA receive from ICOs? Has this number increased?

Patrick: This year the FMA has already received more than 70 inquiries about ICOs. But the trend is slightly declining. We are also noticing that the ICO market has collapsed. But there are more inquiries about crypto exchanges and trading platforms for tokens.

Ramona: Does the FMA have enough people to cope with the number of ICOs? I heard you set up a regulation lab.

Patrick: Three years ago, the FMA created the “Regulatory Laboratory” working group, which dealt not only with ICOs but with all FinTech topics. In the summer of this year, this group was transformed into a separate organisational unit, as the number of enquiries continued to increase. This has proved very successful and we can now discuss FinTech topics at eye level with the market.

Ramona: And is the increased number of ICOs the reason why ICOs have to have a legal opinion to come to you?

Patrick: We ask ICOs to make an initial legal assessment by a lawyer in order to discuss and assess the legal issues more specifically. This way we gain speed which is in the interest of the requesters. In addition, we at the FMA are not active in an advisory capacity. It is the task of lawyers and other consultants to structure an ICO according to the needs of a company and to weigh up the advantages and disadvantages of different variants.

Ramona: What else do ICOs have to consider before joining the FMA?

Patrick: The best way to find out about the framework conditions is via our website. Then we recommend that you consult a specialist consultant and/or lawyer. Once the concept has been developed and legally assessed, we can provide feedback relatively quickly. If an inquiry is very general, we can rarely give concrete answers.

Ramona: Do you think there are enough resources for the ICOs who will come to Liechtenstein in the future?

Patrick: I think so. The market as well as the authorities have taken on the ICO and built up a lot of know-how. I also think that the ICO hype is over and that we will see fewer ICOs in the future, but more complex and better-quality ones.

Ramona: Should the Crypto Valley and the Crypto Country support each other in processing ICOs?

Patrick: I think the Crypto Valley and the Crypto Country can benefit from each other. There is a lot of experience and expertise in both places. That should be shared. The framework conditions for ICOs are different, but fundamental issues should be discussed together. I am thinking, for example, of best practices or minimum standards in self-regulation.

Ramona: Does that mean there is enough work for everyone?

Patrick: Absolutely. We are at the beginning of a development and will still have a lot of questions to answer in the coming years and experience exciting developments.

Ramona: Thank you very much for the exciting interview! Finally, what opportunities do you see for Liechtenstein in the area of Fintech and Blockchain? And what other future prospects do you have?

Patrick: Liechtenstein has positioned itself very well internationally. I think we have a good chance of playing a positive and leading role in the Fintech and Blockchain area in the future.

Ramona: Thank you!


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