Why Liechtenstein is an attractive location for the token economy

Liechtenstein is a member of the European Economic Area (EEA).

The topic “Blockchain Act” and MiCA Regulation of the European Commission is red-hot. The newspaper “Wirtschaft Regional” recently published the article “Blockchain Act inspires Europe”. Some days later, the “Liechtensteiner Volksblatt” published in the “Focus Blockchain & CO” an interview with Joachim Schwerin, Chief Economist of the European Commission.

“Dialogue, respect and a sense of proportion — without unnecessarily compromising data protection and privacy — are the best location policy,” Schwerin said.

Liechtenstein, he said, brings particularly good prerequisites for the emerging token economy. It is an established financial centre with a large density of industrial companies, is internationally interlinked with value chains in many innovative economic sectors and also has very short distances between politics, business and society. “This is an optimal combination, especially for the digital transformation of business and industry, which we are also striving for in the Europeen Union,” Schwerin continued.

While the Internet has made it easy to disseminate information globally and almost free of charge, the blockchain makes it possible to transfer values securely in a corresponding manner. But the real potential of blockchain technology lies in much broader economic applications — the possibility of tokenization: Tokens are enforceable rights and obligations stored in digital form on the blockchain. In principle, they enable anyone who is economically active to participate in the token economy. The decisive factors are legal certainty and understanding of the technology, i.e. education, says Schwerin.

hanks to the Blockchain Act, Liechtenstein already offers a high degree of legal certainty: Liechtenstein recognized the potential of blockchain technology early on and created the world’s first legal framework with the Token and VT Service Providers Act (TVTG) — the “Blockchain Act” — which has been in force since 2020.

The Liechtenstein Blockchain Act is remarkable because it provides a comprehensive legal framework which, among other things, also makes the tokenization of fungible things such as precious metals, as well as works of art and other high-value tangible assets possible. This is available in Liechtenstein because the Blockchain Act contains comprehensive civil law provisions, in particular conclusive civil law principles relating to tokens, the representation of rights by means of tokens, as well as their transfer.

Based on the TVTG, a token acts as a container and can represent rights (Tokenization), we call that model the Token Container Model (TCM).

Schwerin says that: “We see very extensive opportunities in blockchain technology, both in the financial sector and in the real economy”. He added that the EU Commission has identified so-called distributed ledger technologies as one of the crucial technologies of the future. If implemented early and used widely, this would fundamentally improve Europe’s global competitiveness.

The EU Commission is pursuing a similar thrust with all of its planned measures to support blockchain technology, as Liechtenstein is doing with its blockchain Act, he says.

“The Liechtenstein TVTG and MiCA are milestones: they complement each other perfectly,” Schwerin says.

The EU Commission’s MiCa proposal is intended to enable crypto service providers licensed in one member state to offer their services — without further licensing — throughout the European Union (“European passport”).

In my opinion, the perspective that with MiCa, Blockchain based Services could be easily passported to the European Single Market (> 400 Mio.) can not be overestimated. We need regulatory certainty for Blockchain Entrepreneurs and hassle free access to a big market. The TVTG and MiCa are therefore big steps towards the token economy.

Disclaimer:

All information provided in this article is given without warranty as to its accuracy or completeness. This article is meant for the personal use of the reader only. This article does not constitute legal advice. You must independently seek legal advice in regards to any matter of personal concern.

Attorney at Law specialized in Banking & Finance and Technology | Former coder | member of the workgroup drafting the Liechtenstein Blockchain Act.