Liechtenstein Wants To Be A Cryptocurrency Hub
The nature of cryptocurrency technology flies in the face of expectations and preconceived notions. With this in mind, it should be unsurprising that some unexpected countries, states, and cities have attempted to grab onto the title of “crypto hub.”
In particular, examples like the country of Malta or the United States city of Cleveland come to mind as places that one might not expect to have such a penchant for drawing the business of companies on the blockchain and the interest of cryptocurrency experts.
But another unassuming country trying to climb the ranks of cryptocurrency-friendly municipalities is The Principality of Liechtenstein. The small Alpine country sits in-between Austria and Switzerland. A small nation, Liechtenstein has a population barely broaching 35,000 citizens and a size of just under 63 square miles.
But despite the things it might have working against it, Liechtenstein might have a set of surprising advantages in the brawl to become the next haven for cryptocurrency and blockchain companies.
Because it is so close to the Swiss banking giants to its left, the country has access to a wide breadth of important international banking assets that some believe will be essential to the cryptocurrency projects that it hopes to facilitate within its borders. But because the country is not accountable to the laws of Brussels, it also has the opportunity to take some regulatory liberties when interacting with the European Union—a market rife for more cryptocurrency involvement.
The country has not merely vainly stated its intentions to become a hub for cryptocurrency technology. Instead, the small Alpine state is already proposing a bill to help incentivize and kickstart the expansion of cryptocurrency companies within the country. The bill is called the Liechtenstein Blockchain Act, and it is gaining some major traction within the country from a variety of different classes of supporters.
This bill does something fundamentally important for the blockchain industry; it sets clear rules and boundaries. At the same time, though, advocates say that the bill will not attempt to directly regulate cryptocurrencies on its own. Instead, the regulatory focus will simply be placed on the transfer of the assets, which seems to be the source of much of the discontent and regulatory woe for many countries.
A solution like this one, says a lawyer on the team trying to draft and pass the bill, would allow the government of Liechtenstein to effectively prevent abuses, while giving the cryptocurrency community the opportunity to continue to grow, experiment, and evolve. By not placing regulations directly on the cryptocurrencies themselves, the country allows companies to grow without fear of being hit with unnecessary regulatory hands.
A Growing Trend
This is not the beginning of the small country’s interest in cryptocurrency, either. The country has already determined that ICO tokens are considered to be financial assets distributed by financial instruments, which was an important decision on the path to effective regulation.
They then were able to place ICO-generated tokens under an existing model of regulation, requiring investors to report them like they would any other financially-traded asset.
Additionally, the government requires platforms to provide important basic details to potential investors, including an explanation of how the token functions in terms of their ecosystem. Companies must also register with the Financial Market Authority, of FMA, of the country.
Liechtenstein also has taken steps to institutionally accept cryptocurrencies in an effort to add legitimacy to the expanding markets. They already recognize most altcoins and tokens as a legitimate currency and legal tender within the country. The new blockchain act will denote ownership of a token by the possession of the private key associated with the digital asset.
The Malta Of The Alps
The small country of Malta shocked the world with its immediate advocacy of cryptocurrency and blockchain tech. Binance, one of the most popular exchanges in the world, even moved to the country because of the clear and favorable regulatory structure employed by the progressive government there. Additionally, the national stock exchange in the country recently signed an agreement to work directly with Binance to create a structural and institutional exchange for security tokens.
But Liechtenstein wants to be more than Malta—not the same. The CEO Liechtenstein’s premier exchange, LCX, outlined in a statement that Malta is known primarily for casinos, and that he believes that this will not “attract serious clients.” This alpine country, on the other hand, seems to be vying heavily for the interest of serious investors in cryptocurrency and blockchain technology.
A Future Fintech Hub
For many cryptocurrency companies, the ironic reality is that they actually want to see a government creating a substantive regulatory framework. Afraid to skirt around ill-defined regulations and unclear cryptocurrency laws, many blockchain startups actually want to cooperate with law enforcement and regulators to try to follow the law as closely as possible.
Liechtenstein is in a unique position for a couple of reasons. For one, the country is small enough to be able to easily create a simple regulatory framework that will encompass the concerns of most cryptocurrency companies. The same cannot be said for a country like the United States, while a complicated and large government structure creates a host of obstacles in developing such a framework for regulation.
But the country’s other advantage is that they are uniquely not very seriously bound by the laws of the European Union. Because they are not an official member of the EU, the country is able to skirt some of the stricter regulation that the coalition applies to its member states.
At the same time, though, they are a part of the European Economic Area, or the EEA. This means that, while they do not have to follow the rules to which most EU countries are bound, they can distribute and extend their businesses and products to every country in Europe—especially Switzerland.
As the country tries to establish itself as a future hub for financial technology in the modern era, they have some competition. But as surprising as it may be, Liechtenstein has a host of unique advantages that give the Alpine country some heavy advantages.