What is The Blockchain Act?

The Blockchain Act defines a law for future generations of technology and uses the term “trusted technology transaction systems (VT systems)”. It defines the minimum requirements for activities on blockchain systems and systems close to the financial sector. It further suggests that organisations utilising a VT system should increase the efficiency of the token economy through trust from users. The law itself is intended to be seen as a framework, which means it will provide an appropriate legal basis for token-based applications.

Due to the highly innovative potential of the token economy in a variety of sectors (such as financial services, mobility, the energy market, manufacturing and media), the government of Liechtenstein wants to be proactive in meeting the needs of market participants and industry decision makers. It believes that providing a greater legal certainty for users and service providers in connection with VT systems will support the positive development of token economics in Liechtenstein. In the future, the government anticipates a large number of rights as well as high asset values being stored on blockchain systems.

So, what is the Blockchain Act focussing on?

The increasing popularity of blockchain applications has highlighted problem areas in connection with client and asset protection and misuse. To counteract these scenarios, the Blockchain Act will provide clear regulation and will be used to improve client protection and solidify the reputation of Liechtenstein as a leader in the global blockchain space.

The legal classification of elements on VT systems is another focus of the Blockchain Act. To this end it introduces a new construct, where the “token” enables transformation of “real” world assets into VT systems with legal certainty. The introduction of a legal construct for the token into Liechtenstein law requires that the legal consequences, such as ownership, possession and transfer, must be defined by law as well.

Furthermore, the legal status of book-entry securities in the Liechtenstein law is introduced so that shares can be directly represented as a token through a physical certificate and transferred on the VT system. This also serves to create the interface between securities law and the Blockchain Act which is very significant.

The storage and transfer of digital money and the administration of securities will undoubtedly feature significantly in future applications, however, the government assumes that the areas of application for blockchain technology will go far beyond this and has summarised the enormous field of blockchain application systems under the general term “token economy”.