Taking inspiration from nearby Crypto Valley in Zug, Switzerland, the tiny European principality of Liechtenstein is making every effort to become a hotbed for crypto and blockchain innovation.
Located between Switzerland, Austria, and Germany, Liechtenstein is known for its business-friendly legal framework, unique foundation law and low taxation. In the last decades, Liechtenstein has developed a very professional financial industry and is currently home to more than 700 licensed investment funds and 100 licensed asset management companies. The assets under management of Liechtenstein banks amounted to US$235 billion at the end of 2016.
The Liechtenstein financial marketplace is well known for its openness to innovative ideas and development, and these comprise cryptocurrency and blockchain-based products and companies. Liechtenstein is now going one step further and announced in March 2018 a comprehensive Blockchain Act.
According to Liechtenstein’s prime minister Adrian Hasler, the new act will focus on integrating current business models in regulatory terms in order to give companies and their clients legal certainty. It is “intended to regulate all activities that are possible on technical systems such as distributed ledgers and blockchain systems,” Hasler said.
If and when implemented, the Blockchain Act would provide a legal basis for:
- Security tokens
- Ownership of digital assets
- Transfer of ownership of digital assets
- Security and storage of tokens
- KYC/AML requirements
- Several levels of licensing for business providers in the industry
- Initial coin offerings (ICOs), token sales and token generation events (TGEs)
With the planned act, Liechtenstein would become one of the first countries in the world to regulate the blockchain topic to this extent and thus create the basis for extensive economic applications. The enactment is expected by fall 2018 and the law is intended to be put in force by beginning of 2019.
For Patrick Bont, executive board member, head of the banking division and practice leader for fintech at the Financial Market Authority (FMA) of Liechtenstein, it is the country’s small size that’s providing it with a considerable advantage over other jurisdictions.
“Because we are so small, blockchain companies can move a lot faster here than other countries,” Bont said. “You can call us for a meeting on Monday morning and we can meet you for lunch on Tuesday or Wednesday. Very few other places can do that consistently.”
Blockchain industry in Liechtenstein
Compared to Switzerland or Germany, the cryptocurrency and blockchain space in Liechtenstein is still in early stages but a report by Tages Anzeiger suggests that an increasing number of companies rejected by Swiss banks are now tending towards neighboring Liechtenstein.
Liechtenstein now hosts more than 100 blockchain countries, according to Thomas Nägele, and financial institutions such as Bank Frick have been supporting them.
In recent years, Bank Frick has grown into a recognized leader in the space, and has helped over two dozen ICO projects establish traditional bank accounts with many more in the pipeline.
Today, the bank has approximately 200 clients in the crypto and blockchain space including corporate clients, such as cryptocurrency mining groups, brokers, exchanges, traders, and ICOs, as well as private clients engaged in the crypto and blockchain space.
Liechtenstein’s Union Bank announced earlier this month plans to issue its very own security tokens, and become “the first fully regulated bank” to do so.
In the future, Union Bank said it intended to become the world’s first “blockchain investment bank” and “a one-stop crypto and blockchain solution provider which embraces and integrates the new world of blockchain technology and crypto assets and the best practices of traditional banking.”
The move came just days after Liechtenstein Cryptoassets Exchange (LCX) and Binance, one of the world’s largest cryptocurrency exchange by trade volume, announced a new crypto-to-fiat exchange backed publicly by the prime minister. The new Liechtenstein-based exchange, dubbed Binance LCX, will support trading between the euro, Swiss franc and major cryptocurrency pairs, according to a press release.
Commenting on the launch, prime minister Hasler, said:
“Blockchain technologies are laying the basis for an entirely new industry. We are confident that Liechtenstein’s existing and future legal framework and practice provide a robust foundation for the Binance LCX and other blockchain companies to provide exceptional services here in Liechtenstein.”
Featured image: Liechtenstein, Pixabay.
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