In September 2020, the European Commission presented its draft on the regulation of crypto assets, which aims to establish a pan-European framework for the regulation of crypto assets of all types and related services and issues. The draft has four general objectives:
- Provide legal clarity and certainty to promote the secure development of crypto assets and use of DLT in the financial services sector;
- Promote innovation and fair competition by creating a favorable environment for the issuance of crypto assets and the provision of related services;
- Ensure a high level of consumer and investor protection and market integrity; and
- Mitigating potential risks to financial stability and monetary policy.
The proposed regulation in particular aims to remove EU-wide regulatory barriers to the issuance, trading, and post-trading of tokenized financial instruments, while respecting the principle of technology neutrality, and to expand sources of funding for companies through increased issuance of new cryptocurrencies (ICO’s) and tokenized financial instruments (STO’s).
Likewise, it aims to mitigate the risk of fraud and illegal practices in token markets and open up new investment opportunities and new types of payment instruments for consumers and investors.
The future regulation is intended to ensure uniform regulation for all member states and covered participants, which according to the Commission is long overdue in view of the already broad acceptance of cryptocurrencies. Entry into force is expected at the earliest until the end of 2022. Moreover, a large part of the provisions will only become applicable after a transition period of 18 months.
The planned EU regulation is also of central relevance for Liechtenstein in several respects, as the regulation is a legal act relevant to the EEA internal market and will therefore also apply in the EEA.
The Principality of Liechtenstein was one of the first countries in the world to rely on comprehensive regulation of the Blockchain sector with the Blockchain Act (TVTG), which came into force on 1 January 2020. The TVTG not only makes the provision of certain services in the blockchain sector subject to licensing and stipulates information requirements for public offerings. In particular Liechtenstein was the first country in the world to regulate the token as a legal instrument with the Token Container Model (TCM) and to classify tokens differently based on the rights held in them (Utility Token, Security Token, Payment Token). Therefore, Liechtenstein is already practicing the comprehensive regulation of the Blockchain sector for almost 2 years.
A look at the existing Liechtenstein laws shows that the TVTG also served as a model for MiCAR and thus for the regulation of cryptoassets at the European level. In particular, the MiCAR draft adopts the Token Container Model of the TVTG, the licensing requirement for the provision of certain blockchain related services and also the information requirements for public offerings.
Accordingly, there will be only minor changes for the existing practice in Liechtenstein after the MiCAR has entered into force and all existing and future projects located in Liechtenstein alike will be able to benefit from years of experience of the authorities and service providers in the regulation of cryptoassets.