Blockchain companies have discovered Liechtenstein as the new place-to-be. The major reasons to settle in Liechtenstein are industry-friendly regulations, cooperative authorities and the emergence of an entire blockchain ecosystem.

London, Berlin, Dublin – those are the cities that usually pop up first in industry reports ranking Europe’s tech hubs. Liechtenstein, despite its well-known reputation in the financial industry, has so far not appeared on anyone’s radar as a place-to-be for tech start-ups. That, however, has changed over the last years.

Being under pressure by its EU neighbors to increase scrutiny of its financial industry, Liechtenstein is slowly maneuvering away from being a tax haven.

But what comes next?

With a population of 37,000 the country has no significant manufacturing capacity and few natural resources. Liechtenstein’s wealth – the country has the world’s highest GDP per capita – is mostly based on its financial industry. For the past 50 years, Liechtenstein has been the gold standard for wealthy people and ruling families, to preserve and protect their family assets via impenetrable trusts and foundations.

As this business model seems no longer in-vogue, the country’s leadership has decided to become Europe’s blockchain hub. And it works. Blockchain companies are flourishing in Liechtenstein, and that’s for many good reasons.

New “Blockchain Act” will create legal certainty and an environment in which businesses can operate

Being a young industry, the crypto and blockchain space is still largely unregulated on the global stage. Different nations have taken different views on how to regulate and support the industry. To avoid surprises, blockchain companies need to carefully examine the regulations and the legislative outlook of the jurisdiction in which they set up their business.

While regulations are often frowned upon by innovative tech companies that require flexibility, they are a necessary part of an industry’s evolution. Many companies have gone from building up their business in a country without any restrictions, only for law makers to catch up and dismantle their business models. A prominent example is Huobi, one of the world’s biggest exchanges, which was forced to leave China last year because the government has changed the legislation.

Therefore, serious blockchain companies who are in for the long run are looking for jurisdictions with stable and reliable regulations, which allow them to develop and grow their businesses. Liechtenstein is the first country that has proposed a comprehensive legal framework to regulate the blockchain industry. The so-called “Blockchain Act” will be put into force in early 2019 and is widely regarded as blockchain industry-friendly.

Government agencies are supportive and eliminate roadblocks for the industry’s development

The government’s support goes beyond the Blockchain Act. “The Liechtenstein regulators, especially the financial market authorities, are very educated about cryptocurrencies and are very open to the whole blockchain idea – everything is possible,” says Yanislav Malahov, founder of Aternity.

The Financial Market Authority (FMA) of Liechtenstein has recently introduced the so-called “regulatory lab,” which is a place where blockchain companies can get in touch with regulators and make suggestions. In general, the FMA is often praised by blockchain companies as being very accessible and cooperative.

Liechtenstein sees the emergency of an entire blockchain ecosystem that spans from law firms and advisors to financial institutions

As more and more blockchain companies are setting their foot into Liechtenstein, an entire ecosystem that supports the industry is emerging. Specialized law firms, consulting companies, banks, and an armada of well-trained industry professionals are clustered in the area.

“All paths here are short, meaning that efficiency and speed – for example, in founding a company – have distinct advantage,” says Thomas Nägele from Nägele Attorneys at Law LLC. “On top of that, as a new business you’ll find diverse, solutions-oriented institutions willing to help here in Liechtenstein.”

Proximity to financial institutions is especially important for the blockchain industry. That’s where Liechtenstein, with a well-developed financial sector, has an edge over other jurisdictions. Liechtenstein’s banks are blockchain friendly, they handle cryptocurrency investments and offer ICO advice. In neighboring Switzerland, for example, financial institutions shy away from the blockchain sector, with currently only five banks offering services to the industry.

Blockchain companies have the major advantage that they do not need to worry about their customers’ location, so they can choose to establish their businesses wherever they want. To make the best out of it, companies should carefully examine the opportunities and threats of each jurisdiction. With friendly regulations and a supportive ecosystem, Liechtenstein seems to be leading the way.