Crypto Research Report: Liechtenstein Prime Minister Discusses Crypto and “Blockchain Act”

Crypto Research Report: Liechtenstein Prime Minister Discusses Crypto and “Blockchain Act”

by October 8, 2018

The Principality of Liechtenstein, a microstate in Central Europe known for its many private banks, is making a name for itself within the cryptocurrency industry as a friendly jurisdiction.

For the past two years, the government has been crafting a groundbreaking law, dubbed the Blockchain Act, that would see the introduction of an expanded set of legal rules for applications of blockchain technology.

Incrementum Partner Mark Valek with Liechtenstein‘s Prime Minister Adrian Hasler

Incrementum Partner Mark Valek with Liechtenstein‘s Prime Minister Adrian Hasler

“We have seen very specific areas such as ICOs or cryptocurrencies regulated in other countries. We have chosen to deliberately develop a comprehensive approach to clarify these fundamental questions,” Liechtenstein’s prime minister Adrian Hasler told Incrementum partner Mark Valek in an exclusive interview featured in the firm’s fourth Crypto Research Report.

“Controlling tokens embodies all kinds of rights on blockchain platforms. Customer protection is very important for us, so we clearly define all the roles that exist in the token economy and regulate them in order to create legal certainty. A major concern of ours is also the applicability of money laundering laws, due diligence and so on as elementary parts of this new decree that we are planning. […] Our aim with this law is to clarify the fundamental questions of the token economy.”

Liechtenstein’s openness towards cryptocurrencies and blockchain technology is part of a broader goal to “maintain Liechtenstein’s quality of life for the future and to preserve as well as create new jobs,” Hasler explained. In particular, he noted that blockchain fitted “perfectly into this strategy.”

“This is the main goal we are pursuing in the long run. Especially with these new technologies, we have found that there is great potential, that it comes with great disruptive power, and that it brings opportunities for the small state of Liechtenstein,” Hasler said.

“Our aim is simply to be very open to innovation. We already took up the subject of innovation in the last legislature meeting, and we have already implemented appropriate measures with the Liechtenstein impulse program and want to incentivize the financial sector to innovate, too.”

Liechtenstein is about to start the consultation process of the new law. Comments and feedbacks from regulators will then be incorporated and the relevant legislative proposal will then be submitted to Parliament.

“If all goes well, we will probably be able to do this in December,” Hasler said. “It is the first time the country is dealing with this bill, and I expect that we could have the bill in place by summer 2019.”

Hasler expects the Blockchain Act to have “a positive impact” on Liechtenstein’s financial center as it will make it easier for banks and other financial intermediaries to deal with blockchain technology.

“We are already seeing that banks, trustees, and lawyers are very interested in our draft and see great potential for new business models. In the meantime, various companies from the fintech sector have already settled in Liechtenstein,” he said.

“This radiates to the outside world and leads to other companies taking an interest in our location. We have noticed that a new ecosystem is emerging in Liechtenstein that will certainly continue to grow.”

Liechtenstein, which has set out to become a leading fintech hub, established a regulatory laboratory in 2016 to act as an internal team of experts for the fintech area and a point of contact for startups and firms with innovative business models.

As of March 2018, Liechtenstein was home to some two dozen companies belonging to the fintech sector, according to Patrick Bont, executive board member of the Financial Markets Authority (FMA) and head of the banking division as well as the fintech team at the FMA. Over the past three years, the FMA has received and processed more than 100 inquiries related to initial coin offerings (ICOs).

“I think [as a location for the blockchain industry] we are well-positioned given our innovation-friendly government and our financial market supervision, which sees potential in this area,” Hasler said.

“Further, our regulatory laboratory, which is very well equipped to take up the concerns of companies at an early stage, also provides advice and guidance which is quite unique. Last but not least, our honorary membership is also a great advantage since we also have the EU passport, i.e. market access to Europe.”

The Crypto Research Report, published earlier this month by Incrementum, an asset and wealth manager based in Liechtenstein, explains the opportunities and challenges related to smart contract technology, crypto assets and utility coins.

Among the key findings, the report notes that although cryptocurrencies and crypto assets are rapidly entering the mainstream, investors are still unable to store cryptocurrencies securely. Coinbase, one of the US’ leading cryptocurrency trading platforms and crypto asset services providers, estimates that US$20 billion will flow into cryptocurrency custodian services this year.

The report argues that in the long-term, the market will unlikely be able to support hundreds of blockchain with similar features and that only a few blockchains with strong development teams will dominate.

It also discusses valuation methodologies for cryptocurrencies and claims that the market is overwhelmingly overbought with major corrections expected to take place.


Featured image: Mark Valek, Dr. Thomas Dünser, and Prime Minister Hasler discuss Liechtenstein’s Blockchain Law, by Incrementum.