The Liechtenstein law that is actualizing the dream of the token economy
Liechtenstein was the first jurisdiction in the world to pass a comprehensive law on tokenization. When the Token and Trustworthy Technology Service Provider Act (TVTG) became law on 1 January 2020, it became possible for issuers to tokenize any asset that exists in the physical world – from real estate, through precious metals and collectibles, to securities such as equities and bonds – with the comfort of legal certainty.
Dr Thomas Dünser, director of the office of financial innovation of the Government of Liechtenstein and a member of the Supervisory Board of the BFG Blockchain Founders Group in the principality, told Dominic Hobson how intermediaries, issuers and investors are using the law to make a reality of the coming “token economy.”
Questions that are being asked
- Liechtenstein has had blockchain law (TVTG) since January 2020. What use has been made of it so far?
- EU law is helpful to the TVTG at present (e. g. EU law insist on retaining a CSD) but tokenisation platforms in other jurisdictions have accepted that limitation and it will in any event change, at least for crypto-assets, in 2024 when a new EU law comes into effect. Why not act now to get ahead of the competition?
- As a member of the EEA, Liechtenstein can already passport tokenised services into the EU, so being a tokenisation centre now could lead to rapid growth. Is that not another argument for acting more aggressively now?
- What sort of assets have been tokenised so far in Liechtenstein (e. g. mutual or alternative funds, crypto-currency funds, real estate, gold, car receivables) and on what scale?
- Where are the issuers coming from in terms of jurisdictions and industries?
- Bank balance sheets are strained, so there is a rising expectation that banks will want to tokenise assets. Is this a trend which you are observing?
- Are some or all the private banks in Liechtenstein helping to structure the issues?
- Are Liechtenstein law firms getting involved in advising issuers?
- How much of the experimentation that has taken place so far is reality, as opposed to proofs of concept or pilot studies or even effectively just sales and marketing?
- When do you expect the tokenisation market in Liechtenstein to mature from the retail to the institutional?
- Trust companies to help set up a legal entity are a longstanding feature of the Liechtenstein marketplace, and a start-up (Amazing Blocks) has digitised and tokenised the process. How important are services of this kind in helping Liechtenstein to grow as a tokenisation centre?
- Where are the investors coming from – are they clients of the private banks or of the asset managers in Liechtenstein (or both)?
- Are asset managers in Liechtenstein more enthusiastic about tokens than the private banks?
- What are the obstacles to rapid progress in exploiting the tokenisation law and opportunity in Liechtenstein – is it legacy systems or conservative attitudes or a lack of issuers and investors or something else?
- A regulated secondary market or trading platform would clearly help tokenisation to take off, yet Liechtenstein does not have its own regulated stock exchange even of the traditional kind. Is that a handicap in growing a tokenisation market?
- What prevents the private banks and/or asset managers in Liechtenstein setting up a token exchange?
- Are there any conceivable circumstances under which the government might step in to directly create or indirectly encourage creation of a token exchange?
- How do you see the Liechtenstein tokenisation market evolving over the next five years?