Stablecoin Equivalency: Achieving Low Volatility through Currency Unit Secured Issuance
A new trend is emerging in the world of cryptocurrencies, as stablecoins are gaining popularity for their ability to achieve low volatility by securing each issued unit with a corresponding amount of a currency. This innovative approach has sparked interest among investors and financial institutions alike.
Understanding Stablecoins
Stablecoins are designed to maintain a stable value relative to a specific currency, such as the US dollar or euro. To achieve this stability, each stablecoin is secured by an equal amount of the underlying currency. This means that if you receive a certain amount of currency in exchange for a stablecoin, you can redeem it for the same amount of currency.
Regulatory Landscape
While stablecoins are not yet regulated separately under financial market law or the TVTG (Transparency and Trust in Electronic Money Institutions) Act, they may be subject to licensing requirements under existing traditional financial market laws. The issuing of stablecoins could be classified as either a security token or a payment token, which would fall under different regulatory frameworks.
Taxation
In Liechtenstein, tax laws are relevant for natural persons and legal entities with a seat in the country. The taxation of stablecoins depends on their classification as utility tokens, payment tokens, or security tokens.
- Utility tokens: Trading profits are subject to regular taxation.
- Payment tokens: Trading profits are also subject to regular taxation.
Money Transmission Laws and Anti-Money Laundering
Stablecoin transactions may be subject to money transmission laws and anti-money laundering regulations. Financial institutions handling stablecoins must adhere to strict guidelines to prevent illegal activities, such as money laundering and terrorist financing.
Ownership and Licensing Requirements
The TVTG (Transparency and Trust in Electronic Money Institutions) Act provides a legal framework for the ownership, possession, and disposition of cryptoassets. However, there are currently no specific licensing requirements for investment advisors or fund managers holding cryptocurrency.
DLT Sandbox Regime
The EU has introduced the DLT Sandbox Regime, which allows for the operation of blockchain-based trading facilities with reduced regulatory hurdles. This regime aims to promote innovation in the development of distributed ledger technology while ensuring transparency and investor protection.
Conclusion
As the stablecoin market continues to evolve, it is essential for investors and financial institutions to stay informed about the regulatory landscape and tax implications. With the right understanding of these factors, stablecoins have the potential to revolutionize the way we think about digital currencies and their role in global finance.