EU DLT Sandbox Regime and Liechtenstein’s Fintech Scene: A New Era for Cryptocurrency
The European Union has recently introduced the DLT (Distributed Ledger Technology) Sandbox Regime, paving the way for innovative fintech companies to flourish in the region. As part of this initiative, Liechtenstein is positioning itself as a hub for cryptocurrency and blockchain-based businesses.
A Licensing Framework Fit for Fintech
The TVTG (Technology-Based Financial Services Act) has established a licensing framework that caters specifically to the unique needs of fintech companies. The act provides a clear set of guidelines for TT (Technology-Based Transactions) service providers, including:
- Exchange Service Providers
- Custodians
- Token Issuers
Key Requirements for Fintech Licenses
To obtain a TVTG license, fintech companies must meet certain requirements, including:
- Technical Suitability: Companies must demonstrate their ability to provide reliable and secure services.
- Governance: A clear organizational structure is required, including procedures for dealing with conflicts of interest and outsourcing agreements.
- Internal Procedures and Control Mechanisms: Written internal policies and control systems are necessary to ensure the smooth operation of business.
- Financial Resources: Minimum capital requirements vary depending on the type of service provided.
- KYC/AML (Know Your Customer/Anti-Money Laundering) Compliance: Companies must implement adequate policies and store relevant data in Liechtenstein.
Additional Requirements for Specific Fintech Services
Some TT service providers have additional requirements to meet, including:
- Custodians: Must put in place measures to prevent loss of private keys/tokens, segregate assets, and establish business continuity management.
- Exchange Service Providers: Must have internal control mechanisms in place before starting operations.
FMA Supervision
The FMA (Financial Market Authority) is the competent authority for TVTG licenses. After licensing, fintech companies are subject to event-driven or ad-hoc supervision, rather than ongoing prudential oversight.
Cooperation with the FMA and Efficient Licensing Process
Liechtenstein’s small size and tech-savvy population enable a collaborative approach between fintech companies and the FMA. Meetings can be held to discuss project details and licensing requirements, allowing for a more efficient process.
No Specific Regulation of Cryptocurrency Mining
There is no specific regulation of cryptocurrency mining in Liechtenstein. Individuals can mine cryptocurrencies on their own account without triggering licensing requirements. However, professional mining services or those with certain participation models may fall under the TVTG or financial market regulations.
The introduction of the DLT Sandbox Regime and Liechtenstein’s fintech-friendly framework are expected to attract more businesses to the region, creating a new era for cryptocurrency and blockchain-based innovation in Europe.