CMS Expert Guide to Crypto Regulation in Liechtenstein

Generally, VT service providers and agents that are subject to registration under the TVTG are subject to AML requirements under the Liechtenstein Due Diligence Act (Sorgfaltspflichtgesetz, DDA). In implementation of the FATF standards, all service providers related to tokens or virtual currencies who offer services to third parties are therefore subject to anti-money laundering supervision (Article 3 SPG).

Services that require registration include, but are not limited to, the following:

• Exchange, if subject to registration requirements as a TT Exchange Service Provider (Art 3 (1) (r) SPG);
• Custody, if subject to registration requirements as a TT Key Depositary and TT Token Depositary (Art 3 (1) (r) SPG).

For the other mentioned activities, it depends on the specific field of activity and details of that activity to provide an appropriate answer.

As a rule of thumb, whenever licensing or requirements are triggered (also under traditional financial regulation), AML requirements will apply.

It is crucial to assess on a case-by-case basis what kind of cryptocurrency is part of the business model and what licensing requirements may be triggered due to, for example, the processing of payments or other relevant processes that are part of the services provided.

Subject to the registration requirement under the Law of 3 October 2019 on Tokens and TT Service Providers (Token and TT Service Provider Act; TVTG), the following activities are regulated:

Exchange

According to the legal definition, a “TT Exchange Service Provider” is a person, who exchanges legal tender against Tokens and vice versa and Tokens for Tokens (Art 2 (1) (q) TVTG);

An “exchange”, which (instead of offsetting a transaction against its own book) brings together buying and selling interests from a number of participants and has no ability to interfere with the transactions, will not qualify as a “TT Exchange Service Provider”, but may qualify as a “TT Price Service Provider”, which is also regulated (Art 2 (1) (s) TVTG).

Custody

VT (Virtual Tokens) Key Custodians and VT Token Custodians are individuals or firms who safeguard tokens or private keys for third parties.

“TT Key Depositary”: a person who safeguards TT Keys for clients; (Art 2 (1) (m) TVTG).

“TT Token Depositary”: a person who safeguards Token in the name and on account of others; (Art 2 (1) (n) TVTG).

Borrowing/ lending and yield/ staking

There is not yet specific regulation applicable to the borrowing or lending of crypto (i.e. if no fiat or e-money or financial instruments are involved). However, there is a bill on the table in parliament that will specifically regulate these activities if passed.

Under the present regulations,  the legality of an action depends on the specific field of activity and details of that activity. Depending on the business model, staking and lending can be associated with services that are subject to the TVTG, such as Key or Token Depositary services. Note that whenever the respective crypto qualifies as a financial instrument or e-money, further licensing requirements apply, also for exchange and custody.

It is crucial to assess on a case-by-case basis what kind of cryptocurrency is part of the business model and what licensing requirements may be triggered due to, for example, the processing of payments or other relevant processes that are part of the services provided.

For the above-mentioned services, the AML requirement is linked to the registration under the TVTG.

Therefore, for the following questions, the provisions of the TVTG must also be considered.

The Financial Market Authority Liechtenstein (FMA) must decide on the application for registration under the TVTG within three months. (Art 19 TVTG). The FMA emphasizes that the duration of the respective registration process depends significantly on the quality of the submitted documents.

In addition, it must be taken into account that the TT Service applied for may only be exercised for the first time after having entered into the TT Service Provider Register (Art 19 (5) TVTG).

Note that, whenever the respective crypto qualifies as financial instrument or e-money, further licensing requirements apply. In such case, the timeframes are significantly longer.

The regulatory fees of granting or refusing a registration is CHF 1,500. If several services are to be registered, an amount of CHF 1,500 has to be paid for the first service and CHF 700 for each additional service.

Note that his does not include legal advice or incorporation costs. In addition, it has to be considered that, whenever the respective crypto qualifies as financial instrument or e-money, further licensing requirements apply. In such case, the costs are significantly higher.

In general, Art. 13 TVTG specifies the legal requirements for an entry in the TT Service Provider Register. Some requirements are the following, however this is not an exhaustive list:

The TVTG is applicable to natural and legal persons with headquarters or place of residence in Liechtenstein who wish to professionally act as TT Service Providers, Token Issuers or non-professional third-party issuances that are higher than CHF 5 Million in a period of 12 months. The respective requirements for obtaining a registration must be met (e.g. organisational requirements, internal control system, substance, adequate resources and minimum capital, reliability and a technical suitability).

The minimum capital for TT Exchange Service Providers is CHF 30,000 or CHF 100,000 depending on the transaction volume; the minimum capital for a TT Key- or a TT Token Depositary is CHF 100,000.
Further, AML requirements are linked to the registration under the TVTG. Consumer protection/e-commerce requirements must be observed as well.

Under certain circumstances there is the possibility to provide TVTG services on a cross border basis without triggering registration requirements. Advice from local counsel should be obtained.