Crypto License in Liechtenstein

The legality of cryptocurrency business in Liechtenstein

Cryptocurrency business is legal in the small European state of Liechtenstein since the voting in October 2019 of the Token und Virtuelle Token-Dienstleister Gesetz (TVTG) - Tokens and Virtual Token Service Providers Law in English.

Also called the Blockchain Act of Liechtenstein, this text was published by the Financial Market Authority of Liechtenstein, which also happens to be the regulatory authority for crypto activities performed in Liechtenstein.

Companies getting the crypto license in Liechtenstein are also liable to acknowledge and comply with the Due Diligence Act of 2009, last amended in 2020.

The legality of cryptocurrency business in Liechtenstein is defined by the combination of these two laws.

The TVTG defines the different possible activities under the Liechtenstein crypto license, as well as the conditions under which the registration will be accepted. The Due Diligence Act establishes the rules about Anti Money Laundering and Countering the Financing of Terrorism (AML-CFT) and the applicable rules for customer due diligence (simplified due diligence and enhanced due diligence).

Cryptocurrency regulation in Liechtenstein

The cryptocurrency regulation in Liechtenstein is targeted toward natural and legal persons willing to provide virtual token services in and from the country of Liechtenstein.

The TVTG, which is the legal basis for crypto business in Liechtenstein, describes a certain number of activities to be performed:

• Token Issuer;
• Token Generator;
• TT Key Depositary;
• TT Token Depositary;
• TT Protector;
• Physical Validator;
• TT Exchange Services Provider;
• TT Verifying Authority;
• TT Price Service Provider;
• TT Identity Service Provider.

When filing an application for the VASP license in Liechtenstein, a crypto company must decide which of the activities is relevant to its operations. Depending on the selected activities, several requirements will change, such as the minimum share capital required.

Liechtenstein Virtual Cryptocurrency Registry

The Financial Market Authority of Liechtenstein (FMA) maintains a public registry of virtual cryptocurrency companies. The registry is available in German and English language.

The search engine easily permits to filter companies depending on the crypto activity they registered for and their current status (active and/or inactive licenses).

The companies are listed by alphabetical order. The register includes their registration date and number, and all the activities they registered for. The address in Liechtenstein is also publicly visible.

The Liechtenstein FMA ensures the regular update of the registry.

Crypto-authorization process in the Liechtenstein Virtual Currency Registry

The crypto authorization process in Liechtenstein’s registry of virtual currency companies is focused on four aspects:

• The business operations to be conducted (TVTG);
• The compliance with AML-CFT and KYC (Due Diligence Act);
• The technical suitability of the project;
• The reliability of the participants.

The registration of Liechtenstein Company in Register of crypto currency companies

The registration of a Liechtenstein company into the FMA register of crypto currency companies is done within 3 months after preparing the legal structure, IT structure and documents.

The application stage itself is straightforward. The FMA expects the candidates to fill a 7-pages form disclosing the company details, describing the intended crypto services, detailing the individuals composing the team and listing the documents to be provided.

After the completion of the application form and the requested documents, the FMA will assess the application for a maximum of 3 months before giving its response and subsequently granting the crypto license. It is explicitly stated that the activity can only begin after official grant of the license.

Governmental Statements on Crypto in Liechtenstein

After voting unanimously on the Blockchain Act (TVTG in German) in October of 2019, the Government of Liechtenstein publicly communicated its pride to become the “first country to have comprehensive regulation of the token economy”.

Prime Minister, Adrian Hasler, declared “the TVTG implements an essential element of the government’s financial center strategy and positions Liechtenstein as an innovative and legally secure location for providers in the token economy”.

This very early position on the cryptocurrency sector and the fact that the Prime Minister himself expressed such excitement toward the development of the token economy in Liechtenstein shows a strong willingness to encourage crypto business.

In more recent developments, the Liechtenstein’s Office for Financial Market Innovation and Digitization described the willingness to fill the gap to the upcoming MiCA regulation in Europe when the latter comes into force in 2025.

Requirements for companies engaged in crypto activities in Liechtenstein

The requirements to fulfill in order to satisfy the demands of the FMA for getting a crypto license in Liechtenstein are focused on four aspects: the corporate structure, the compliance with the law, the IT systems (“Technical Suitability”) and the fitness and property (“Reliability”) of the participants.

The crypto project must have its headquarters in Liechtenstein.

It should open a bank account to deposit the minimum required share capital. This share capital is 50,000 CHF for a company in Liechtenstein, but depending on the chosen crypto activities, the share capital requirement can grow up to 250.000 CHF (more details in the “Type of Licenses in Liechtenstein” section).

The organizational structure of the company must be clearly documented, with “defined areas of responsibility and a procedure to deal with conflicts of interest”.

To comply with the Due Diligence Act, the crypto project shall prepare AML-CFT policies and procedures, internal manuals and control mechanisms and risk assessments in order to prevent financial crime and report suspicious activity to the FMA.

A crypto company in Liechtenstein must appoint a contact person responsible for functions such as due diligence officer and investigation officer, whose role will be the enforcement of the compliance rules.

The project then carries on its application by filing the FMA 2020/1 Form, enclosing the required documents and paying the application fee of 1.500 CHF, plus an additional 700 CHF for each additional service to be performed by the company.

The process of setting up a company for a cryptocurrency business in Liechtenstein

Setting up a company in Liechtenstein for a cryptocurrency business takes approximately 2 business weeks. It can be done remotely, though the company must have its headquarters in Liechtenstein in order to receive the crypto license.

A noteworthy specificity of incorporating a company in Liechtenstein is the requirement to deposit a share capital of 50.000 CHF (approximately 57.500 USD) on a bank account. This share capital cannot be used by the company afterwards. Plus, depending on the nature of the activities to be conducted, the share capital requirement may rise.

The ultimate beneficial owners of the company are required to provide identification documents in order to register the company. A certified copy of a passport and a proof of residence at a minimum are necessary to create a Liechtenstein company.

Taxation for cryptocurrency companies in Liechtenstein

Cryptocurrency companies in Liechtenstein are taxed similarly to companies working in other professional domains. The corporate tax rate in Liechtenstein is 12.5%, with a minimum amount of 1,800 CHF in the accounting year.

The dividend tax rate in Liechtenstein is fairly attractive for citizens of certain countries, with a rate going from 0% to 10%. These attractive tax rates are notably applicable for the majority of European countries.

Obligations for crypto companies in Liechtenstein

A company having secured a crypto license in Liechtenstein must maintain the same standard of compliance it showed for the licensing process. The FMA is explicitly expecting licensees to oblige with the requirements at all times.

The share capital requirement for example, must be permanently met (the FMA will require proof at the end of the business year).

In addition to the necessary AML-KYC requirements, the licensee has the obligation to maintain internal control mechanisms relevant to its crypto activity or activities.

To give a few examples (the law details more obligations pertaining to each crypto activity):

• Token Issuers must disclose complete information to the public, prepare a business continuity management plan in case of interruption of the services;
• TT Key Depositories must establish high level cybersecurity measures to safeguard their customers’ assets;
• TT Token Depositories must segregate customers’ token accounts from the business assets and establish suitable measures to protect the clients’ virtual assets;
• TT Protectors must, as Key Depositories and Token Depositories, take the best possible measures to protect the clients’ assets and keys;
• TT Exchange Service Providers must disclose comparable market information about the price of the token traded on their platform;
• TT Verifying Authorities must demonstrate the effectiveness and reliability of their verification services;
• TT Price Service Providers must ensure full transparency of the published prices and avoid conflicts of interests;
• TT Identity Service Providers must make usage of the best possible systems and methods to ensure identity verification;
• All crypto service providers must provide public information on their IT systems, with a declaration that they are suitable for the intended usage of the clients.

Sanctions for violating Liechtenstein crypto-business obligations

A crypto license in Liechtenstein can be revoked in certain circumstances. For example, if the business is inactive for a complete year (including from the granting of the license), the registration will expire.

The FMA is legally obliged to sanction a Liechtenstein crypto business and revoke its license if it no longer meets the requirements initially set.

Registering with false information is also a violation of the crypto business obligations in Liechtenstein and automatically leads to the removal of the crypto license. Other violations of the legal obligations will also lead to similar sanctions.

The individual responsible for the violations, or several persons if that is the case, will be liable to pay for damage, individually or jointly depending if the damage is personally attributable to their own negligence and circumstances.