Half a year ago, on 21 June 2018, the Liechtenstein government announced in an information event that a nationwide regulation of blockchain and the token economy was planned. Dr. Thomas Dünser, government employee in Liechtenstein, presented the cornerstones of the law to the public. Read here what the status quo is for the planned law:
Ramona: Hello Thomas, thank you for the interview. For a start, can you tell us what function you have and what you do?
Thomas: I work in the Ministry of Presidential Affairs and Finance of the Liechtenstein Government and am, among other things, responsible for financial centre innovation.
Ramona: It has been some time since the Blockchain Act was introduced. What delayed the law, so that it could not enter into force in 2018 already?
Thomas: It was never planned to bring the law into force in 2018. A draft law runs in a defined timetable, starting with the official consultation and ending with the law coming into force. In these many steps in between, delays may occur again and again. With the Blockchain Act, we are actually still on schedule.
Ramona: What is the status quo and when can we expect the law?
Thomas: In the consultation process we received a lot of substantial feedback, which we have evaluated in the meantime and – if sensible – taken into account. The report and motion to the Landtag are currently being finalised. If everything goes according to plan, the law will enter into force in the second half of 2019.
Ramona: What was the reason to create a blockchain law and thus such a crypto-friendly country? And who worked on the draft law?
Thomas: The question should rather be: Why should a country be “crypto-hostile”? That would be like a state having something against digitization. The Blockchain Act is part of the government’s long-standing efforts to strengthen the innovative capacity of the financial centre. The innovation of the government’s framework conditions, including regulation, is particularly important to support the competitiveness of financial service providers. We maintain an intensive dialogue with innovative companies in order to identify important developments or difficulties in the framework conditions at an early stage and to take them into account quickly. For this reason, at a relatively early stage, we came across a number of fundamental issues in the blockchain, which mean a great deal of legal uncertainty for companies. And we want to solve these problems and questions with the Blockchain Act. Several experts from different disciplines were involved in the draft law.
Ramona: Where can I find detailed information and updates on the law?
Thomas: Best on the webpage www.impuls-liechtenstein.li.
Ramona: Can you give us a brief summary of what the law is and what the law makes possible?
Thomas: The law comprises several parts: First, a civil part, in which the nature and legal embedding of the token in the legal system, as well as fundamental questions about ownership, property and the legal effect of a transfer, are regulated. These regulations are a central legal basis for all applications on the blockchain. Second, it deals with the requirements for the essential service providers in blockchain systems. It is not only about the regulation of today’s business models such as crypto exchanges, but about basic functions of the so-called token economy. The token economy is a term for another major development in the digitalization of the economy. Third, there are the publication requirements for the issue of tokens, which are unclear today. And fourth, there is the question of clarifying the application of money laundering and sanction laws to the token economy.
Ramona: Do I have more rights to my tokens or crypto currencies through such a blockchain law and will everything be better regulated then? E.G.: If a token is stolen, do I still have rights as owner?
Thomas: Yes, an important part of the law is about such questions. For example, the law regulates the rights of the owner if a token is stolen and creates the basis for police and courts to classify this correctly. The law also regulates the handling of private keys or tokens which are kept by a service provider in the event of bankruptcy, so that the customer is protected from loss of assets. As you can see, there are many very fundamental questions that we want to clarify.
Ramona: Is there already a similar draft law in other countries?
Thomas: No, as far as I can see we are pioneers with this very far-reaching proposal. The discussion in many countries revolves primarily around the handling of so-called crypto assets, i.e. crypto currencies or tokens for investment purposes. But this is only a relatively small part of the possible applications.
Ramona: A few weeks ago, the ESMA (European Securities and Markets Authority) announced an EU and EEA-wide proposal for unification in the blockchain market in the form of a comprehensive blockchain law. What do you think?
Thomas: There are some open questions today about financial market applications of blockchain technology. I think it is important for the EU to create clarity here and to lay down uniform rules for the whole of the EEA. However, it is also very important that such measures do not disconnect the other interesting applications of blockchain technology.
Ramona: Many blockchain companies come to Liechtenstein because of the planned regulation. Do you believe that with a uniform law the unique position of the first mover still exists for Liechtenstein?
Thomas: The blockchain companies need clarity as to the legal framework in which they are allowed to operate. The least an entrepreneur needs is a residual risk of unwittingly violating a law. It is therefore not surprising that many blockchain companies choose Liechtenstein as their location, since we are the first to provide very extensive clarity about what is permitted and what is not. Since many cross-border applications of the token economy also depend on the legal basis in other countries, a uniform legal framework in Europe is, in my view, very welcome.
Ramona: What would the USP be for Liechtenstein if such an EU and EEA-wide law were to enter into force?
Thomas: With such a law, we have not reached the end of the road. New applications will emerge in the coming years and decades, which may in turn require an adaptation of the legal bases. In my view, the structures and processes by which a state can accompany this development are much more important than a regulatory advantage. And Liechtenstein is very well positioned in this respect.
Ramona: And how long would it take for such a uniform EU or EEA law to come into force?
Thomas: That’s difficult to assess. Normally, the legislative process at EU level needs a certain amount of time to ensure the inclusion of all states.
Ramona: What other opportunities and developments do you see for Liechtenstein in the Blockchain and FinTech sector?
Thomas: I currently see a strong dynamic in security tokens, but also in the tokenization of physical things, but many other exciting new applications and business models will follow. We are now at the beginning of a very dynamic development in the digitalization of our economy, which was triggered by the blockchain.
Ramona: Thank you for the interview!
Image: ©Dr. Thomas Dünser