The recent turmoils surrounding FTX and Alameda has once again drawn public attention to the crypto industry and particularly provided new breeding ground for criticism of the industry as a whole. Calls for a ban on cryptocurrencies have even been voiced by individual members of the investigative committee set up in the FTX case.
Such demands are obviously inappropriate and disproportionate and fail to recognize the true causes of these events. Accordingly, in particular the major financial market players such as Blackrock, Fidelity or JP Morgan Chase remain convinced that the next generation of financial markets will be based on tokenized assets.
Nevertheless, the impactful events surrounding FTX once again highlight the importance of adequate regulation for a sustainable future of the markets of cryptoassets, which ensures that the future of a crypto service provider and its customers is not dependent on the actions of individual inexperienced and irresponsible persons, but that an adequate governance structure and risk management is implemented and that leading individuals actually have sufficient experience in the areas in which they will operate.
For precisely these considerations, Liechtenstein became the first country in the world to enact the Liechtenstein Blockchain Act (TVTG) back in January 2020, which requires appropriate governance and risk management structures for the provision of crypto services.
The TVTG also served as a role model for the MiCA Regulation, which will provide uniform regulation across the EU/EEA and, just like the TVTG, is intended to ensure that the European market is spared from FTX-type events.
MiCAR is expected to be enacted during the second quarter of 2023 and then become applicable in mid or late 2024 after a transition period of 12 to 18 months. As a member state of the EEA, the provisions of the MiCA Regulation will also be applicable in Liechtenstein and will then replace the provisions of the TVTG.
During this transition period, the provisions of the TVTG will also be gradually adjusted to ensure that crypto service providers subject to the TVTG can transition as seamlessly as possible to the new regime under the MiCA Regulation.
Accordingly, all companies that have already registered under the provisions of the TVTG prior to the expiry of the transition period will have the opportunity to obtain a license under the MiCA Regulation in a simplified and accelerated procedure and benefit from EU-wide passporting.
Another component of the Digital Finance Strategy is the DLT Pilot Regime, which we have already reported on separately: https://niedermueller.law/de/dlt-pilot-regime-in-liechtenstein/
In the coming months we will present the future regulation under the MICA Regulation in a series of newsletters and compare it with the existing regulation under the TVTG. In particular, we will present the scope of application and the individual Crypto Asset Service Providers (CASPs) under the MiCA Regulation.
Furthermore, based on our experiences of the last years, we will cover some essential topics in further newsletters, which Blockchain companies in Liechtenstein should consider mandatory. In particular, we will outline the corporate governance structure, the regulatory framework, the KYC/AML requirements and the protection of IP rights from a practical point of view and explain the current best practice in Liechtenstein.
Our newsletters are intended and aimed to help existing and future crypto service providers to adapt to the upcoming regulation as well as entering the market and to raise awareness of important problem areas which are all too often neglected. In this way, we also want to ensure that the quality of the players in the Liechtenstein market continues to improve and that Liechtenstein can continue to live up to its role model.