Tokenization of assets has become a ubiquitous trend. But a lack of ability to legally host digital tokens has attracted entrepreneurs and CEOs to Liechtenstein due to the country’s scant regulations in this area. Low tax rates have made Liechtenstein a haven for startups and financial organizations – the country has more companies registered than citizens!
PricewaterhouseCoopers (PwC), an audit and consulting firm,
declared Liechtenstein's tax policy on cryptocurrencies and other digital assets to be the most comprehensive in the world for the second year in a row. The company evaluates countries on 19 factors to determine the comprehensiveness of their policies on digital assets and transactions. This includes the taxation of mining, staking, NFT, and other aspects.
Two years ago, Liechtenstein began enacting a legal framework to regulate cryptocurrencies and blockchain-based technologies. The
main law is called TVTG – the Token and Trusted Technology Service Provider Act. Lawmakers in Liechtenstein have provided new roles for the parties involved and established responsibilities and requirements for everyone. The law describes the requirements for tokenization services, the purpose and types of tokens, and liability for non-compliance. Tokenization service providers are required to obtain a license for their activities, file reports, and register with state registries.
The law also defines the tokenization method. A token is a component of the data flow in the Trusted Technology system and can represent different types of rights or claims. It can be identified, verified, and transferred to another person.
In addition to rights, a token can be tied to different types of goods. Depending on the attachment, the token is classified as a service token, a payment token, or a security token.
To fit the new law into the existing regulatory framework, lawmakers had to make several amendments to the Due Diligence Act (SPG), the Financial Market Supervision Act (FMAG), the Persons and Companies Act (PGR), and the Business Act (GewG). Attached to the law were Instructions that took effect in August 2021. There are still open questions in crypto market regulation, which the Liechtenstein government and the European Union continue to address.
Liechtenstein is a member of the EEA (European Economic Area), but not the EU. TVTG is a significant step in the legalization of
blockchain, and it is crucial not only for market participants but also for the government. As a member of the EEA, Liechtenstein has created a law compatible with the EU/EEA directives and regulations. However, banks and financial organizations registered in Liechtenstein can deal with digital currencies to bypass certain onerous EU requirements. Liechtenstein banks continue to offer
cryptocurrency investments and advice. Meanwhile, the financial sector in the rest of Europe ignores the crypto market.
For many companies, Liechtenstein provides regulation and unique legal certainty. Some other countries are already heavily involved in blockchain legislation and plan to introduce similar rules.
The blockchain law has given entrepreneurs in Liechtenstein regulatory certainty and the ability to create a technologically supported trust. On one hand, the law regulates civil law issues regarding customer and asset protection. On the other hand, the law establishes adequate oversight of the various service providers in the token economy. By following the guidelines, blockchain companies in Liechtenstein can increase the
transparency and efficiency of processes and ensure trust in business relationships more easily than in other countries.
