Liechtenstein and Switzerland both have location advantages for blockchain businesses. Which country to choose depends on the unique circumstances of each company.

On March 01st, 2007, 170 Swiss Army Troops crossed the border into Liechtenstein. Most newspapers didn’t even bother to report on the temporary invasion. It wasn’t the beginning of a war, it soon became clear that it was simply an error in orienting.

What could have led to a diplomatic crisis elsewhere was barely even noticed in the Alps. The relationship between the two countries is great. People speak the same dialect, use the same currency, and many Swiss view Liechtenstein more as 27th canton rather than another country.

Yet still, there are differences, especially for blockchain businesses. Recently, Swiss companies increasingly view Liechtenstein as a more attractive location; some even consider to relocate. Last year, 250 companies contacted the Financial Market Authority Liechtenstein (FMA), says Thomas Dünser, Director of the Office for Financial Centre Innovation. Some of them are from Switzerland.

EEA-membership a key advantage of Liechtenstein

Even though some businesses might think about following the troops across the border, a true rivalry is not on display. “It is not our goal to incorporate as many businesses as possible or to increase employment,”  says Dünser. Liechtenstein already has more jobs than inhabitants anyway.

Likewise, Switzerland’s decision-makers don’t seem too worried about the potential competition. Daniel Diemers, Blockchain-expert at PwC, believes the main reason why companies expand or move from Switzerland to Liechtenstein is the country’s membership in the European Economic Area (EEA), which provides access to the European single market.

Liechtenstein-based lawer Thomas Naegele, from Naegele Attorneys at Law, agrees with Diemer’s argument. “We see companies moving to Liechtenstein because they are not able to access the European single market. Companies that are incorporated in Switzerland decide to open branches in Liechtenstein because they want to provide their services to the EU,” he said in an interview with CNN Money Switzerland.

Even though it is possible to provide services from Switzerland to the EU, it’s way faster and it’s also more cost-effective from Liechtenstein because companies have direct access, argues Naegele.

In the future, this direct access will become particularly important for companies selling security tokens. Prospectuses approved in Liechtenstein can be passported to any other European country with minimal bureaucratic effort.

Frank Wagner, CEO of Liechtenstein-based Blockchain Investment Manager INVAO, says, “The FMA Liechtenstein has accepted our securities prospectus, which made it easier for us to provide our services in European countries as well. We experienced the processes in Liechtenstein as smooth and effective, which is why we decided to establish a base here in the first place.”

Liechtenstein ahead in terms of legislation

When asked whether or not the Blockchain Act will attract more companies to Liechtenstein, Naegele said, “I think when it comes to legislation, we are ahead. It [the Blockchain Act] is a very comprehensive legal framework.” He believes in 2020, 10 to 20 companies will make a move from Switzerland to Liechtenstein only because of the Blockchain Act.

“If you want to start a new venture, you have to think about your location first,” recommends Negele. “If you are already incorporated in Switzerland, you have to have very good arguments to move your business to Liechtenstein. One could be, for example, that Switzerland is not allowing you to provide your business. Then yes, relocating makes sense.”

However, when asked if Switzerland should copy-paste the Blockchain Act, Naegele believes that won’t help. “I think some of the ideas of our Blockchain Act are now being proposed in Switzerland. But jurisdictions have to do their own homework; they have to analyse their own frameworks and fix their own problems.”

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