Whereas other countries are focused on regulation designed to create revenue, the Principality of Liechtenstein is focused on regulation designed to foster innovation. As opposed to the legal framework established by other countries attempting to regulate specific aspects of the pre-existing technology, the Liechtenstein Blockchain act – Trusted Technologies Law (TTL) –puts forth a forward-looking law encompassing all aspects of a token economy. Although in the public consultation phase, and therefore not currently legally binding, the act is anticipated to come into force during mid-2019. Ultimately, the TTL is comprised of forward looking definitional strength, coupled with guidance from proven regulatory entities, resulting in the perfect storm for ensuring a flourishing “Token Economy.”
I. Definitional Strength
In order to understand the innovation behind the TTL, as well as its far-reaching scope, one must first understand the innovation behind the definition of a “token.” The TTL defines a token as:
“Information on a TT System that can embody fungible claims or membership rights to an individual, goods, and/or other absolute or relative rights and ensuring the assignment to one or more Public Keys.”
Whereas jurisdictions like Switzerland took to dividing tokens into different categories, and other Malta and Bermuda put forth legislation specifically targeting ICOs, Liechtenstein is taking a wholly different approach.
Instead of providing a ceiling definition, the TTL provides a floor. In other words, the TTL puts forth an all-encompassing base definition of a token, capturing all token classifications, as opposed to a celling, or limiting definition, beyond which the law cannot reach.
Ultimately, the TTL provides a definition that can be likened to that of a container, thus leading to Thomas Nägele’s development of the “Token Container Model”. Here, the token can be representative of anything from the traditionally defined tokens of utility, security, or payment tokens; but, this also serves to encompass tokens that are representative anything from assets to commodities, securities to intellectual property, even encompassing tokens representative of nothing at all. Inevitably, this model allows for the embodiment of any and all kinds of rights, thus encapsulating the ever growing and changing landscape of blockchain technology.
II. Legislation to Accommodate Potential Hurdles
Outside of simply defining a token, the act goes one step further by anticipating potential problems and providing solutions that fall within the scope of institutionalized governmental support. To illustrate, we live in a world where there is an “online” and “offline” presence. Within the realm of the tokenization of assets, this presents potential challenges, leading to the role of the physical validator.
As described by Nägele, imagine there is a person named Max and he is looking to tokenize his bicycle. “Offline,” Max possesses the ownership, or “right” of the bicycle, which is the “thing.” While “Online,” Max is seeking to tokenize this ownership. The problem becomes, who ensures that the bicycle exists, that Max is in fact the owner of said bicycle, and that Max’s ownership rights are not transferred “offline”? Long story short, the TT Act anticipates this potential problem and puts forth the role of the Physical Validator, creating an entity whose main role is the connection of the “offline” and “online” worlds.
III. The Presence of Proven Regulatory Success
Another benefit of the TTL is the regulatory authority tasked with enforcement of the Act’s provisions. As opposed to creation of a new regulatory authority to deal with blockchain technology, the TTL tasks the Financial Market Authority (FMA) with carrying out the various provisions of the act. One might ask the question, as I have heard numerous times, “why the FMA?” Inevitably my response is, “why not the FMA?”
When Liechtenstein comes to mind, the first thing that people tend to think of is banking. Then, when assessing the success of the banking industry within the country, the FMA must be taken into consideration. Seeing that the FMA is the regulatory authority responsible for the success of the banking industry, the FMA is uniquely suited to ensure that same success occurs within the crypto and blockchain sectors. Under this structure, Liechtenstein puts forth the perfect framework for providing regulatory certainty, while at the same time providing governmental support from a governmental body perfectly positioned for making blockchain boom within the country.
Instead of attempting to create a new authority which lacks experience, the TTL places the growth of this technology in the hands of body with expertise in international KYC and AML compliance. Ensuring the presence of a stable financial center, the FMA will extend these strengths and efficiencies to successful promotion of blockchain projects within the country, carrying with it an impact to be felt worldwide.
IV. Forecasting the Future
It becomes clear that this law does not simply attempt to “chase the wind.” Rather, it is clear that the regulatory authorities in Liechtenstein have a lot more in mind then merely turning a fast profit. Possessing the foresight to anticipate even more growth an innovation, coupled with the proven regulatory success of the FMA, the TTL provides the perfect combination for entrepreneurs looking to carry out successful projects.
None of us can be Nostradamus, but the TTL provides a framework that is able to accommodate growing pains that are clearly present within the realm of crypto and blockchain technology. Even though we are at the 10-year anniversary of Bitcoin’s creation, we are still barely scratching the surface of the changes and innovations to come. With that being said, of us here at NÄGELE are eagerly awaiting the enaction of the TTL and the building of an even stronger blockchain community within the country.
–> More about the Liechtenstein Blockchain Act can be found HERE