Government of Liechtenstein Moves towards a Blockchain Act

The central government of Liechtenstein adopted the Report and Motion on the creation of a Law on Tokens and Trustworthy Technology Service Providers (Token and TT Service Provider Act; TVTG), generally called the “Blockchain Act”.

Legal basis for the token economy

Since blockchain technology is undergoing rapid growth and is also being used more and more, it becomes utterly important to make sure that it is applicable for subsequent tech generations and for that, a law needs to be proposed. This is the reason why the term “transaction systems based on trustworthy technologies (TT systems)” is used for blockchain systems in the newly introduced law, notes the announcement. Because of the high potential that basic blockchain technology possesses, the government has planned to create a legal basis for the areas of application of the token economy and not only to manage the currently going applications, crypto-currencies or Initial Coin Offerings (ICOs) to be more specific. The objective of this legal basis is that there shouldn’t be any need to create a law for every case of application, but to create a central requirement for the rule of law for the future cases which have already started emerging or are most likely to come up. However, the government of Liechtenstein is allowing for the choice of regulating applications close to the financial market in a farther pace.

Formation of legal certainty and strengthened customer protection

Now, whenever something new arrives, it is sure that people will have a lot of doubts and queries about it. Several already expected questions were raised, questions related to the misuse of this new technology and about its enhanced customer/asset protection. The government has clearly said that these risks will be handled under the rules and regulations of the country. As Blockchain Technology is already being used in the country actively, the government wants to make it clear to the people the applicable requirements for important activities on TT systems. This answers the question of customer protection and also helps clarify the pen questions in the application of laws currently in force, especially in the part of due diligence. It has been ensured that the compliance with international standards is maintained and an effective fight against money laundering is won. Many fundamental legal questions are also raised because of the possibility of representing rights in tokens. These questions are also to be clarified so that the general legal certainty of users on TT systems and TT service providers is handled properly. Moreover, it should be known that the main focus of the government is on the fundamental aspects of a token economy. For example, the creation of tokens and their safe custody.

Concept of “uncertificated right”

The concept of “uncertificated right” is also being introduced in the Liechtenstein law. The purpose of this is to clarify how securities can be represented and transferred purely digitally. Also, while this is going on, a connection between Token and TT Service Provider Act (TVTG) and securities law is also being created. In simple words, uncertificated rights are dematerialised securities in which functions of the certificate are replaced by an entry in the book-entry register.

Formation of Adequate regulatory system for the token economy

The announcement says that the consultation process found out a great deal of interest at the national and international level in this proposal. Most of the strong submissions were about the issues concerning civil law and the envisaged registration and supervision system. Finally, a division has been created between the public and the law parts and by further detailing and explaining the definitions.