On May 7th 2019, the Liechtenstein Government adopted the report and motion on Tokens and Trustworthy Technology Service Providers (Token and TT Service Provider Act; TVTG), frequently referred to as the “Blockchain Act”.
Blockchain technology can be used far beyond Bitcoin. It is important because of its ability to record “information” digitally, in effect preventing information from being copied or manipulated and ensuring that it can be transferred securely between persons. It is likely that it will be possible in future to record a wide range of assets or — more generally — rights on blockchain systems and that a large number of services related to these digitized rights will be offered. This creates new opportunities in fields such as financial services, logistics, mobility, energy, industry, and the media. These applications are grouped together under the term “token economy”.
Blockchain Laws of Liechtenstein are setting new legal standards to empower the crypto industry as a whole, not only regulating one part of the industry but enabling a holistic legal framework.
The legislation goes beyond providing legal certainty and security without undue restrictions on innovation and entrepreneurship. Essentially it outlines the financial infrastructure of the growing token economy that Digital Ledger Technology is enabling. By combining technology and regulations every possible asset can be tokenized, digitized, and thus listed and traded on a Cryptoassets Exchange. Tokenized Digital Assets can be financial assets, real estate, bonds, equity, etc.
The Blockchain Laws Liechtenstein are also regulating the issuing and emission of Security Tokens in any form: IOU Tokens (Loan, Debt, Bonds), Derivative Tokens, Fund Tokens, Equity Tokens, Membership Tokens, Joint-Ownership Tokens, Co-Ownership Tokens, Sole-Ownership Tokens. At LCX, we will cover the issuing and emission of Security Tokens with a dedicated team.
The law aims to erase the existing risks in the area of Cryptocurrencies, provide legal certainty and security however without imposing undue limiting restrictions and therewith provide a reliable framework for an entire economy of digital and digitalized assets.
The key elements of the Blockchain Act are:
The Blockchain Act regulating a Token Economy will provide a legal basis for Security Tokens; Ownership of any digital assets; Transfer of ownership of digital assets and Security Token Exchanges; Safe storage of digital assets and legal requirements for the storage of digital assets; Several levels of licensing for business providers in the Token Economy; Regulated Security Token Offerings (STO’s), Initial Exchange Offerings (IEO), Initial Coin Offerings (ICO’s), and other Token Sales.
Tokenomics is a new type of economy that can be defined as the design of a particular ecosystem in a blockchain environment. Some of the available ecosystems are ingenious and disruptive, others are pretty dangerous and unstable. Every ecosystem contains several elements and the token functions are the central element of this new type of economy. A utility token is a digital asset used to give access to products and/or services on a platform. Another is a ‘security token’ — that derives its value from an external and tangible asset and offers to the token holders a wide range of rights like entitlement to a share of profits, ownership or equity in a legal entity, and so on.
The Liechtenstein Government defines trustworthy technologies as follows:
Trustworthy Technologies are transaction systems, which offer a safe transaction and safe storage of digital embodiments of rights as well as service delivery via reliable technologies based on these systems.
Reliable technologies ensure the integrity of the token, the clear assignment to the controlling owner as well as the provision without an operator. These technologies replace the function of an operator who is responsible for quality and integrity.
Blockchain technology allows financial institutions to create direct links between each other, avoiding correspondent banking. It helps remove all the mediators between the two parties, hence increasing the trust & transparency.
The goals of the new blockchain laws are the protection of the user, the protection of the service provider, the protection of the trust in the digital legal regulations and the development of the token economy as a whole.
You can find the official press release by the Government of Liechtenstein here.
For LCX, this is another milestone to strengthen the Liechtenstein blockchain ecosystem and to enable future growth of the crypto industry.