As the first country in the world, Liechtenstein will introduce a Blockchain Act in 2019. With this, the government intends to provide higher legal certainty for blockchain technology and support the token economy. Dr.  Matthias Niedermüller, lawyer and partner at Niedermüller Attorneys based in Vaduz, sets out to show why the new regulation is likely to boost Security Token Offerings (STOs) and why Liechtenstein is already the place of choice for STOs.

Dr. Niedermüller, what is the current situation in Liechtenstein regarding token offerings?

Niedermüller: We currently experience a shift of the focus in token offerings. Whereas in 2018 mainly ICOs were conducted the majority of cases now focuses on security token offerings (STOs). This is on the one hand due to the upcoming new Blockchain Act but also due to the expectance that shortly FMA licensed Exchanges will open their business in Liechtenstein and then list the respective security tokens for trade. Liechtenstein enables entrepreneurs to digitalize any kind of assets such as real estate, equity instruments, cars, art pieces etc. and thus may be seen as the gateway to generally digitalized assets. This is in particular due to the Token container model of the Liechtenstein Blockchain Act and the existing financial market regulation.

Which issuers are typically interested in doing a token offering in Liechtenstein?

Niedermüller: People from all sorts of countries worldwide are interested in doing blockchain business in Liechtenstein, in particular Token Offerings. To be named are China, Korea, India, US, Germany and in particular also Switzerland. The latter make use of the proximity of Liechtenstein and Crypto Valley and complement existing Swiss structures with the benefits of the Liechtenstein laws.

What makes Liechtenstein attractive for foreign issuers?

Niedermüller: Liechtenstein has a unique position in international relations. In general the country is politically stable, has no debt, AAA Rating, highest GDP per capita worldwide, stable Swiss Franc as domestic currencies. Further due to the EEA membership we may offer full market access to the entire single market of EU and EEA. Also clients very much appreciate the innovation mindset of the country as well as the flexibility of the laws. Further Liechtenstein will probably become the first country in the world to issue a comprehensive blockchain law which will for the first time legally define the Token as a legal instrument. Only a few weeks ago the Government passed the Report and Motion on the Blockchain Act and sent it to Parliament for enactment. We expect enactment still within 2019. Finally, there is also a very supportive attitude of the Government, Financial Market Authority as well as the local Banks regarding blockchain business.

Talking about the implementation of an STO, what does “quick“ mean?

Niedermüller: As usual the answer is that it depends very much on multiple factors such as intended investors, required advice, legal requirements, complexity of the security, etc. If only institutional investors shall be attracted and no approval of the Financial Market Authority is required, the STO could effectively be conducted within two Months. If the FMA has to be involved, this would add at least another one to two months merely because of the approval period. Generally a STO should be doable within 4 to 6 Months.

On the international level, regulators are typically reluctant as far as token offerings are concerned – how about Liechtenstein?

Niedermüller: The Liechtenstein Government has clearly committed towards blockchain business and the Liechtenstein Regulator has a very welcoming attitude towards blockchain business. There is a large team within the FMA dealing with blockchain related businesses. It is very common to introduce future entrepreneurs and businesses already at an early stage to the FMA and to discuss eventual regulatory obstacles at a high level that may arise.

What do owners of a foreign company need to do if they want to go for an STO and issue equity tokens?

Niedermüller: Cross border token issuance is very common practice. Foreign companies usually establish a Liechtenstein subsidiary company which then conducts the STO. In other cases foreign entities move the corporate seat to Liechtenstein and then conduct the STO. This is required to ensure that the tokens issued will fall under the regulations of the Liechtenstein (blockchain) laws. The operations usually do not have to be moved and may be further conducted in the existing place. In connection with this the foreign companies also involve international tax advisors, respectively we connect them with our tax colleagues.

How about the infrastructure for STOs in Liechtenstein?

Niedermüller: On the legal side STOs are conducted by Liechtenstein Attorneys in collaboration with tax advisors. The clients usually provide themselves for the technical implementation (smart contract, technical issuance, payment service provider). If necessary we may also offer the entire package for token issuance in collaboration with other service providers.

The new Blockchain Act shall come into force by autumn 2019 at the latest. What are the major elements of this new regulation?

Niedermüller: The Government just passed the Report and Motion on the Blockchain Act and sent it to the Liechtenstein Parliament for enactment. We expect that the Blockchain Act is enacted still in 2019. The Blockchain Act offers comprehensive regulation of creation, transfer and ownership of digital assets and in particular among many others introduces the Token as a legal instrument and Container of Rights and regulates several roles of service providers in connection with Tokens.

– The entire 384 Page Report may be downloaded under the following Link:

– Further we provide updates on the Blockchain Act on our LinkedIn Profile:

How exactly does the Blockchain Act support the tokenization of assets through STOs?

Niedermüller: Among many other things the Blockchain Act for instance offers clear regulation on the legal qualification of a Token for the first time and provides legal basis for creation, transfer and ownership of Tokens. Thus it provides legal certainty and enforceable rights. It also ensures by the Container Model that any possible asset or right may be tokenized and subject to an STO.

From your perspective, under which circumstances will STOs and the token economy enfold its full potential?

Niedermüller: Currently there are many Security Tokens offered and lined up for listing on a regulated and licensed securities exchange. This infrastructure of securities exchanges is currently built and we are proud to advise some very promising infrastructure projects regarding Securities Exchange. As soon as there are operating licensed securities exchanges which may list security tokens we expect a very steep increase of the Liechtenstein Token Economy.

Disclaimer: Please note that the contents of this interview may not be seen or construed as legal advice but merely for information purpose only. Advice may only be given on an individual case to case basis upon specific instruction and mandate.