The German-speaking countries choose different approaches to regulate blockchain technologies. While Switzerland and Germany have amended their existing legislation, Liechtenstein has introduced an entirely new law.
Lawmakers in many jurisdictions have acknowledged that innovative technologies need a new approach to regulations. In September 2020, the Swiss Parliament adopted the new regulations for Blockchain Technology. In August, several German ministries have published a draft law introducing electronic securities. But there are significant differences in the approaches of these countries to Liechtenstein’s Blockchain Act.
Dr. Thomas Dünser, from the Office for Financial Market Innovation, explains why Liechtenstein has chosen to introduce a separate piece of legislation, the Blockchain Act (TVTG), instead of merely adapting existing laws.
Dünser says the TVTG has an entirely different focus compared to both Switzerland’s and Germany’s legislation. The other countries focus on regulating digital securities, which is primarily a civil law problem and only subsidiarily a securities and financial market’s law problem. Switzerland and Liechtenstein have supplemented the existing securities regulations with blockchain-based securities or book-entry securities.
Liechtenstein has created a statutory legal basis for digital securities. That means companies can issue physical securities and book-entry securities for which no physical paper is required. A simple entry in a digital register will suffice. Also, those securities are independent of technology; the law is formulated in a technology-neutral way.
Moreover, the TVTG clarifies the rules on legal transfer, acquisition in good faith, pledging, and invalidation. Liechtenstein has decided to introduce these regulations in a separate law, so they apply not only to specific applications but all types of tokens. Thus, the TVTG does cover cryptocurrencies and security tokens and all future blockchain applications in the token economy. Based on this law, you could, for example, purchase a right to use a car via a smart contract. While these applications may not yet have arrived, it’s only a matter of time. Accordingly, the Liechtenstein Government wanted to provide a sustainable legal basis for the use of the technology.
Competing for the pole position
As Liechtenstein is a member of the European Economic Area, the country is interested in a token-economy-friendly European market. Thus, if neighboring countries like Switzerland and Germany introduce blockchain-friendly laws and regulations, that brings advantages to Liechtenstein. On the other hand, Liechtenstein is trying to position itself as a blockchain hotspot, aiming to attract digital businesses. Thus, it’s paramount that legislation in Liechtenstein is comparatively attractive.
“From the perspective of Liechtenstein, there is no competition between token economy-friendly countries,” comments Thomas Dünser. “There is instead a constructive dialogue about how to regulate the token economy going forward. With the token economy, we have the chance to foster a new form of a digital and worldwide economy with a high level of legal security and low transaction costs.”