Blockchain and legal certainty in Liechtenstein
This article is the second of a series of articles covering the first countries in Europe to have developed a legal framework related to blockchain. The first article presented Bill 7363, which passed into law in Luxembourg on 14 February 2019.
Liechtenstein is creating a legal framework to improve legal certainty for actors from the financial sector but also for tech companies. On 28 August 2018, the consultation report on the Law on Transaction Systems Based on Trustworthy Technologies (TT) (Blockchain Act) was adopted. The Blockchain Act aims at promoting the development of a token economy and should enter into force in 2019. What distinguishes the Blockchain Act from the Luxembourgish law on blockchain is that it establishes the legal basis for how blockchain can be used in a wide array of sectors besides the financial sector. The Blockchain Act is directed at promoting innovation. As opposed to the legal framework established by Luxembourg, for example, the Blockchain Act provides legal certainty for the entire “token economy”.
The key innovation of the Blockchain Act is that it introduces tokens as legal entities. In Article 5, it defines a token as: “Information on a TT System that can embody fungible claims or membership rights to an individual, goods, and/or other absolute or relative rights and ensuring the assignment to one or more Public Keys.” This means that tokens can represent digitally “real world” rights unlocking a wide range of possibilities for the application of a token economy and facilitating the exchange and storage of ownership.
The consultation report gives the following list of what could potentially be tokenised:
1. Digital payment
2. Shares and bonds, corporate financing via equities, corporate financing via bonds, creation of liquidity / markets, trader, asset management, additional services
3. Other assets and administration
4. Funds
5. Luxury goods (such as for example diamonds, cars or works of arts)
6. Music rights (including intellectual property rights)
7. Other fields of law such as financial market legal system, company law, real estate transaction law, law of property (for example this could include membership rights in a company or property ownership rights)
The introduction of the token as a legal entity calls for legal effects, such as ownership, possession, and transfer, to be legally defined. This new law should provide clear regulation in this regard.
Furthermore, there is currently legal uncertainty about blockchain related service providers that are not covered by financial market legislation. The Blockchain Act aims at enhancing legal certainty in this area too as in Article 6 it stipulates that these service providers will have to register with the Financial Market Authority before starting their activity. Moreover, Article 13 sets the minimum requirements to be a blockchain service provider.
In conclusion, the Blockchain Act gives a comprehensive definition of a token, encapsulating all token classifications, versus a celling, or restrictive definition giving legal certainty to all future application of blockchain in the token economy. This model allows for the embodiment of any and all kinds of rights, hence capturing the constantly increasing and varying state of blockchain technology.
Author: Dr Fanny Tittel-Mosser