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Liechtenstein’s Blockchain Strategy: Prime Minister’s Outlook

“All these measures we are talking about are meant to maintain Liechtenstein’s quality of life for the future and to preserve as well as creating new jobs. This is the main goal we are pursuing in the long run.”

Prime Minister of Liechtenstein Adrian Hasler

 

For the past two years, the government of Liechtenstein has been crafting a first of its kind law related to the blockchain technology. The law signals to entrepreneurs that Liechtenstein is open for business. Prime Minister Adrian Hasler and Dr. Thomas Dünser from the Ministry of Finance are spearheading the project. This is part of a larger project to “digitalize Liechtenstein” by improving all government services and encouraging innovation in the country.

Mark Valek: Many thanks Prime Minister Hasler and Dr. Dünser for taking time. We have some questions that we would like to go through so let’s begin! Liechtenstein has made a name for itself within the crypto industry as a very blockchain-friendly jurisdiction. This has become evident so far from the many ICOs carried out here, by the commitment of the University of Liechtenstein, from regulated crypto funds which were approved here, and now finally also in the imminent adoption of the Blockchain Act.[1] What long-term vision for the principality do you see with this blockchain-friendly strategy?

Prime Minister Hasler: All these measures we are talking about are meant to maintain Liechtenstein’s quality of life for the future and to preserve as well as create new jobs. This is the main goal we are pursuing in the long run. Especially with these new technologies, we have found that there is great potential, that it comes with great disruptive power, and that it brings opportunities for the small state of Liechtenstein. Our aim is simply to be very open to innovation. We already took up the subject of innovation in the last legislature meeting, and we have already implemented appropriate measures with the Liechtenstein impulse program and want to incentivize the financial sector to innovate, too. The blockchain approach fits perfectly into this strategy, as far as the early recognition of opportunities and taking advantage of them is concerned. Providing legal certainty, which is very important in the financial sector, is always at the top of our list. We have experienced this in recent years in the traditional financial sector as well, and especially with these new technologies, that legal certainty can be created here. These are the main directions.

Mark Valek: Last June, the Blockchain Act was presented with great interest for the first time at the University of Liechtenstein. This is one of the first comprehensive legislative frameworks worldwide to formulate an expanded set of legal rules for applications of the new blockchain technology. What are the main cornerstones of this law?

Prime Minister Hasler: Our aim with this law is to clarify the fundamental questions of the token economy. We have seen very specific areas such as ICOs or cryptocurrencies regulated in other countries. We have chosen to deliberately develop a comprehensive approach to clarify these fundamental questions. Controlling tokens embodies all kinds of rights on blockchain platforms. Customer protection is very important for us, so we clearly define all the roles that exist in the token economy and regulate them in order to create legal certainty. A major concern of ours is also the applicability of money laundering laws, due diligence and so on as elementary parts of this new decree that we are planning.

Mark Valek: Is it known when the blockchain law will come into force?

Prime Minister Hasler: We are now about to start the consultation process. This is the first phase, then the regulators will have the opportunity to make comments and give feedback. We will then incorporate these comments and submit the relevant legislative proposal to Parliament. If all goes well, we will probably be able to do this in December. It is the first time the country is dealing with this bill, and I expect that we could have the bill in place by summer 2019.

Mark Valek: Where can interested companies or citizens find out about the law and follow up with questions? Will the law also be available in English?

Prime Minister Hasler: For the time being, the consultation is published and can also be downloaded from the government’s homepage.[2] However, this will not be in English. When the law is passed, it will certainly also be translated into English. We have already translated many laws into English, which are also available on our portal, and I assume that when this law is passed, it will be available in English on the portal as well.

Mark Valek: What impact do you think the law will have on the domestic banking system?

Prime Minister Hasler: I expect the Blockchain Act to have a positive impact on our financial center. The law will make it easier for banks and other financial intermediaries to deal with the blockchain. We are already seeing that banks, trustees, and lawyers are very interested in our draft and see great potential for new business models. In the meantime, various companies from the FinTech sector have already settled in Liechtenstein. This radiates to the outside world and leads to other companies taking an interest in our location. We have noticed that a new ecosystem is emerging in Liechtenstein that will certainly continue to grow.

Mark Valek: You have touched on this somewhat: Are there already companies that have announced their plans to make use of the law?

Prime Minister Hasler: In recent weeks, we have repeatedly received feedback from companies, and this feedback has been very positive. In Dr. Thomas Dünser we also have a competent contact person in the ministry. He is in close contact with the scene and feels the pulse. This shows that some of these companies are waiting for the law to come into force.

Mark Valek: Is there something like an association, someone with whom you were in bilateral talks with or was there a central point of contact?

Dr. Dünser: In drafting the law, we involved a core group of experts from various fields who have already dealt intensively with the blockchain. In addition, I hold relatively frequent discussions with entrepreneurs from the field in order to know the current developments and to recognize the upcoming problems.

Prime Minister Hasler: It is also exciting in this context that there are already local companies such as law firms, trustees, and also banks that have been intensively involved in this topic for some time. Many of them are in close exchange with Dr. Thomas Dünser and can also bring in input. Thus, a certain scene with both external and Liechtenstein companies has already formed here, and it was a great advantage that one could rely on these resources as well as assessing the know-how in the preparation of such a proposal.

Mark Valek: Especially with these new technologies, it is important because everyone has to learn somewhere, which we also see as our mission with the Crypto Research Report. Are you in contact with legislators in neighboring countries on the blockchain issue?

Prime Minister Hasler: We follow very closely what is being done in other states and jurisdictions, which is very interesting for us. We also exchange ideas with international organizations on a regular basis.

 

Mark Valek: How do you assess Lichtenstein’s progress as a location for the blockchain industry compared to Switzerland or other international locations?

Prime Minister Hasler: What we can say for sure is that we have been dealing with the subject of innovation and subsequently also with the subject of the blockchain for several years now and are working hard to optimize the framework conditions in this area. The Blockchain Act is now part of this work, and I think we are very well positioned given our innovation-friendly government and our financial market supervision, which sees potential in this area. Further, our regulatory laboratory, which is very well equipped to take up the concerns of companies at an early stage, also provides advice and guidance which is quite unique. These factors coupled with the short distances we have make a great package of Liechtenstein with which we can of course also score accordingly. Last but not least, our honorary membership is also a great advantage since we also have the EU passport, i. e. market access to Europe.

Mark Valek: We want to consider the whole topic from another standpoint: The chairman of the SEC has stated that every ICO he has seen so far resembles a traditional IPO and would therefore be subject to its supervision in the case of the USA. Do you agree with his view?

Prime Minister Hasler: We take a different view on this subject. There are tokens that are similar to securities and of course they are subject to this legislation – that is clear. However, there are also tokens that often reflect rights of use and, in our view, in Liechtenstein and other European countries, these do not fall under the securities legislation of the financial market regulation.

Mark Valek: Is the Financial Market Authority in charge of classifying these tokens?

Prime Minister Hasler: Yes, it is the central authority that classifies them together with the regulatory laboratory and then advises the companies and shows whether it embodies a soft right of use from the point of view of the FMA or it is similar to securities and therefore also subject to financial market regulation.

Mark Valek: Allow me to bring in another question: I assume that the FMA will inevitably put resources into it. Is there already a specific department there or people who are specifically responsible for that?

Prime Minister Hasler: A few years ago, the FMA established the Regulatory Laboratory, a cross-divisional organization that dealt with this topic and supported companies. The next step has been taken, and this regulatory laboratory has been further professionalized with supervisory management and equipping it with appropriate human resources. Nevertheless, the original areas are still responsible for approvals. This means that, as far as a banking licenses, insurance, etc. is concerned, the relevant departments are responsible. But the first point of contact for such businesses is the regulatory laboratory. There they give feedback if the token falls under the securities law of the financial market regulation or not, and then it goes into the normal process.

Mark Valek: There’s probably a point of contact or a person in charge?

Dr. Dünser: Yes, there is the head of the Office for Innovation and Regulatory Laboratory for the Financial Centre, Dorotha Rohlfing.[3]

Prime Minister Hasler: The second position of contact is the Ministry of Finance led by Dr. Thomas Dünser, and this is also very important that both the ministry of the government and the FMA have respective contact points on both sides and so that businesses can orient themselves there. We are joining forces so that all the information can be passed on.

Mark Valek: Which of the local banks and companies are ready to enter the crypto world, or are there interesting projects you have been following?

Prime Minister Hasler: For obvious reasons, I do not want to mention any special names now, but you can see that the interest of the local banks, but also of lawyers and fiduciaries, is very big. I have noticed in recent months that a great deal of time is being invested there, that appropriate training is being acquired, and specialist skills are being obtained in order to be active in this area as well. It turns out that there are many interesting projects by companies approaching Liechtenstein from outside and are looking for local business partners to set up their businesses here in Liechtenstein.

Mark Valek: There are lawyers who specialize in these matters and they are probably the first reference for many foreigners.

Prime Minister Hasler: Exactly. Some lawyers specialized early on. Some lawyers specialized in these topics at an early stage and are in great demand today. By the way, we also took this expertise into account when drafting the Blockchain Act.

Mark Valek: Last but not least, are there any other blockchain-friendly measures that are in the pipeline?

Prime Minister Hasler: We are constantly working on improving the framework conditions and would like to implement this Blockchain Act as a next step. That means discussing it with parliament, adopting it, and then entering it into force. That certainly still needs appropriate resources. Nevertheless, we are constantly in discussions with the market to feel the needs of the community, and to see where further measures are necessary, and we are very much looking forward to implementing further improvements. But currently there is no concrete project.

Mark Valek: Wonderful, of course I don’t want to take away either of you the chance to make any further comments or suggestions.

Prime Minister Hasler: I think the questions you have asked were well picked and I think we have given a proper overview of the subject. There’s a lot going on right now. Above all, the debate in parliament will be quite exciting. Before that, I am already very curious about the consultation that will come out of the comments. Whether this approach which we have chosen will also meet with approval. I assume that, but I am curious about further potential for improvement. In addition, the discussion in parliament will be very exciting and then, in the end, the effects it will have once the law has come into force. We hope that we will get good feedback and that companies in Liechtenstein will find a good location and that many of them will settle here.

Mark Valek: Excellent, then I would like to thank Prime Minister Hasler and Dr. Dünser very much for their time and wish them all the best for the future.

Prime Minister Hasler: Thank you very much, Mr. Valek. Thank you also for your interest and interview.

[1] See “Vernehmungslassungsbericht Blockchain-Gesetz,” Ministerium für Präsidiales und Finanzen, August 29, 2018.

[2] See “Vernehmlassung zum Blockchain-Gesetz gestartet,” Regierung des Fürstentums Liechtenstein, August 29, 2018.

[3] See “Medienmitteilung: Regierungslabor wird verstärkt,” Finanzmarktaufsicht Liechtenstein, April 20, 2018.

Written by

Mark Valek
Mark Valek is partner of Incrementum AG and responsible for Portfolio Management and Research.

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