If you type into Google, “What is Liechtenstein famous for?” you’ll get this:
“Liechtenstein is a country in Western Europe. It is the sixth smallest country in the world and, with Uzbekistan, one of only two doubly landlocked countries. This means that it is landlocked by a landlocked country. … Liechtenstein is famous for its many private banks.”
Landlocked by a landlocked country … and many private banks. That’s it?
Maybe in the past, but things are changing in Liechtenstein.
By 2020, the answer to the question “What is Liechtenstein famous for?” could look like this:
“Liechtenstein is a country in Western Europe. It is the sixth smallest country in the world. Liechtenstein is considered Europe’s main blockchain hub. The country has earned an international reputation for creating a supporting blockchain ecosystem and hosts a large portion of Europe’s blockchain industry…and many private banks.”
That’s a lot more interesting than Liechtenstein being, “landlocked by a landlocked country.” The current developments regarding blockchain technology will shape the country’s future economic success. If you are a blockchain business, here is why you should be moving to Liechtenstein:
Liechtenstein is introducing blockchain-friendly regulation to support the industry
A major reason for blockchain companies to set up shop in Liechtenstein is the so-called Blockchain Act, also known as the TTTL – Token and TT Service Provider Law, which will be put into force in 2019. The proposed legislation aims at creating the first comprehensive regulatory framework for the blockchain industry.
Lack of regulation has so far been one of the key issues for the industry’s development. While the techno-anarchic nature of blockchain might be appealing to some of its users, it is a major hindrance for those companies who try to integrate with the traditional economy.
With no regulations in place, pretty much everyone can issue a new coin. This opens the door for fraud and misuse. The lack of governance is also a reason why one third of all ICOs fail.
Without regulations, it is hard for blockchain companies to gain trust and to interact with the financial industry. Especially banks shy away from the blockchain sector due to KYC and AML regulations. Even Swiss banks, which have earned an international reputation for being “open-minded,” are still reluctant to do business with blockchain companies.
Liechtenstein’s Blockchain Act therefore aims at creating legal certainty. If that works as intended, blockchain could move into the mainstream.
And eventually even JPMorgan’s Jamie Dimon might start “giving a sh*t”.
Supporting FinTech growth is a main objective of Liechtenstein’s Financial Market Authority
Liechtenstein’s government is supportive on other fronts as well.
The Financial Market Authority (FMA) has launched a think tank called Regulatory Laboratory/ Financial Innovation. Its tasks include the handling of enquiries from FinTech companies, coordinating the cooperation of public and private sectors, and further developing FinTech expertise within the FMA.
In 2016, the Regulatory Laboratory processed a total of about 30 enquiries. In 2017, the number had risen to 101. By mid-April of this year, the number of processed enquiries has already reached about 50.
The enquiries that reach the FMA also show that interest in Liechtenstein goes far beyond Europe’s borders. “We’re even getting calls from entrepreneurs in Japan and the U.S. who are interested in the Liechtenstein financial center,” says Patrik Bond of the FMA.
An armada of well-educated financial industry professionals is ready to rumble
Human capital is the most important asset in business – even more so in tech companies.
Liechtenstein has a good reputation amongst Europe’s professional elite. Besides high salaries compared to the rest of Europe, there is little tension between employers and employees. There is only one union, the LANV, which represents all employees across all industries.
Liechtenstein has a well-educated population and attracts foreign experts from neighboring countries. No less than 10,500 workers commute every day from Switzerland, and over 8,200 from Austria, to earn their living in Liechtenstein. Many of those are highly qualified financial industry professionals.
The city of Zurich, one of the world’s principal financial centers and training ground for financial industry talents, is just a one-hour train ride away.
Liechtenstein-based businesses have easy access to the entire European Economic Area and Switzerland
Liechtenstein is part of the European Economic Area (EEA), but not a member of the European Union. Furthermore, Liechtenstein also enjoys a Customs and Currency Treaty with Switzerland.
This means, companies based here have easy access to the European market, but do neither have to report to EU government bodies nor comply with all EU regulations.
Nevertheless, most EU financial market regulations still apply to EEA members states. Hence, Liechtenstein’s financial institutions have to comply with almost the same legal requirements and standards as any financial institution established in a member state of the European Union.
That’s not a bad thing though. It adds to Liechtenstein’s trustworthiness and it makes it easier to connect with European markets. Just recently, Liechtenstein was taken off the EU list of “Grey States” of tax havens, showing that Liechtenstein complies with most relevant EU regulations.
Financial institutions are willing to work with blockchain businesses
Liechtenstein’s financial services sector is open to the new technology. Banks offer various services for the blockchain industry, such as cryptocurrency investments and ICO consulting.
Liechtenstein-based banks such as Bankhaus Frick offer services specifically tailored to blockchain companies. The bank advertises rapid transaction speed and low bureaucratic hurdles.
Moreover, the Liechtenstein Cryptoassets Exchange LCX will soon launch its services including crypto trading, crypto custody, a trading platform for security tokens and an international fiat to crypto exchange.
Liechtenstein has an overall friendly business climate
Liechtenstein is generally viewed as a business-friendly nation. It has an AAA rating from Standard and Poor’s and an outstanding reputation of a well-respected and serious place for doing business.
Yes, Liechtenstein-based companies also have to pay taxes. But not much. All corporations in Liechtenstein are subject to a flat 12.5% corporate tax rate.
32% of the country’s revenues are invested in Research & Development. It is safe to say that Liechtenstein is a country that is boosting innovation. The government and corporate culture are open for new concepts and forward looking.
Liechtenstein has all the prerequisites to become Europe’s Blockchain Silicon Valley, excepts that it’s not a valley.
Already today, an entire blockchain ecosystem is emerging. Specialized law firms, consultants, and other third-party providers have moved to Liechtenstein. Just recently, Liechtenstein received the “2018 Blockchain Ecosystem of the Year” award at the Crypto Challenge Forum in London.
Altogether, Liechtenstein makes for a great place for blockchain companies. A government with a vision to grow the industry and an overall supportive business environment are hard to find elsewhere in the world.
After all this praise, I can no longer hide the fact that I’m a fan of Liechtenstein’s approach to blockchain. I would like to point out though, that I do not receive any profit share if Liechtenstein’s tax returns increase. I’m just amazed by what’s happening around here and would like to invite you to become part of it.
The Liechtenstein Blockchain Act: Creating Legal Certainty for a Token Economy Have a look in our article.