On January 1, 2020, a new law on the regulation of blockchain came into force in the Principality of Liechtenstein; the “Law on Tokens and Trusted Technology Service Providers”, in short TTTL. The Parliament of Liechtenstein had passed the so-called Blockchain Act on October 3, 2019.
With this regulatory work, the Principality is breaking new ground. It is the first country in Europe with a comprehensive legal regulation for blockchain, digital ledger technology (DLT) and crypto-token. The TTTL is intended to create legal security for transactions with the new technologies and at the same time strengthen customer protection.
Liechtenstein as a blockchain hub
The TTTL not only answers questions in regard to asset protection and possible misuses such as money laundering or terrorism financing through the use of DLT. It also offers companies the necessary scope for new business models that enable the establishment of a true token economy beyond cryptocurrencies such as Bitcoin. Against this background, new opportunities and business models are opening up for financial service providers and blockchain players.
The Blockchain Act thus offers groundbreaking framework conditions and legal security. At the same time, it contributes to the further professionalization of the industry and thus strengthens confidence in this new market. This applies in particular to traditional players; many of them are not yet familiar with blockchain technology and its advantages or are still hesitant to implement blockchain-based products.
The innovative law defines a total of ten roles of the emerging token economy. These are subject to various licensing and supervisory obligations; from the token issuer to the operator of the crypto-exchange to the identity service provider.
TTTL — 3 years until adoption
The planning for a comprehensive blockchain regulation had already begun three years ago.
The government had made the plans public in March 2018. In July 2018, the intended legal changes were specified. A first draft of the regulations officially called the “Tokens and Trusted Technology Service Provider Act” (TTTL) followed in August 2018.
On May 7, 2019, the Government adopted the report and proposal concerning the creation of the new law.
New legal terms
Because of the rapid pace of development of blockchain technology and its areas of application, it is very important to draft a law abstractly enough to ensure that it remains applicable for subsequent technology generations. For this reason, the term “transaction systems based on trusted technologies (TT systems)” is used for blockchain systems.
In the future, Liechtenstein will treat tokens as a new, separate legal object. The law clarifies fundamental aspects of a token economy, such as the generation of tokens, their safekeeping, and their transmission. The term “token” is also introduced as a new legal concept. The Blockchain Act defines “token” as a new construct to enable the transformation of the “real” world to blockchain systems while ensuring legal certainty. Thus opens up the full application potential of the token economy.
The Liechtenstein crypto scene had eagerly awaited the new legal regulation. Despite its popularity as a location for crypto start-ups, legal hurdles also slowed down certain crypto businesses in Liechtenstein, such as the installation of Bitcoin ATMs.
Source: Details of the Liechtenstein Blockchain Act are available on an official government information page. Via this link, you can view the TTTL (only in German). The first unofficial translation in English is online as well.