Financial Crime World

Cryptocurrency Compliance Challenges in Liechtenstein Amid EU Regulation Draft

The European Commission’s draft on the regulation of crypto assets, presented in September 2020, has significant implications for Liechtenstein’s blockchain sector.

Background

The proposed regulation aims to provide legal clarity and certainty, promote innovation and fair competition, ensure consumer and investor protection, and mitigate potential risks to financial stability and monetary policy. The regulation will remove regulatory barriers to the issuance, trading, and post-trading of tokenized financial instruments while respecting technology neutrality.

Liechtenstein’s Blockchain Sector

Liechtenstein, which was one of the first countries to comprehensively regulate the blockchain sector with its Blockchain Act (TVTG) in 2020, will need to adapt to the EU’s new framework. The TVTG makes provision for certain services in the blockchain sector subject to licensing and stipulates information requirements for public offerings.

Existing Laws

The country’s existing laws show that the TVTG served as a model for MiCAR, the European draft regulation on crypto assets. The MiCAR draft adopts the Token Container Model of the TVTG, licensing requirements for blockchain-related services, and information requirements for public offerings. This means that there will be only minor changes for Liechtenstein’s existing practice after the MiCAR takes effect.

Key Features of the EU Regulation

  • Removes regulatory barriers to the issuance, trading, and post-trading of tokenized financial instruments
  • Respects technology neutrality
  • Expands funding sources for companies through increased issuance of new cryptocurrencies (ICOs) and tokenized financial instruments (STOs)
  • Ensures uniform regulation across all member states and covered participants

Timeline

The entry into force of the EU regulation is expected by the end of 2022, with a transition period of 18 months. As the regulation is a legal act relevant to the EEA internal market, it will also apply in the EEA, making it crucial for Liechtenstein’s blockchain sector.

Conclusion

With its existing experience and expertise in regulating crypto assets, Liechtenstein is well-positioned to adapt to the new EU framework and continue to thrive as a hub for blockchain innovation. The country’s blockchain sector will need to undergo minor changes to comply with the new regulation, but overall, this development is expected to bring more clarity and certainty to the industry.

Key Takeaways

  • Liechtenstein will need to adapt its existing laws to comply with the EU’s new framework on crypto assets
  • The TVTG served as a model for MiCAR, the European draft regulation on crypto assets
  • The EU regulation aims to promote innovation and fair competition, ensure consumer and investor protection, and mitigate potential risks to financial stability and monetary policy
  • The entry into force of the EU regulation is expected by the end of 2022, with a transition period of 18 months.