Crypto Licence in Liechtenstein

Crypto Legislation

While there are plenty of general laws – from company law and taxation to consumer rights) – and industry-specific laws (e.g., real estate, finance, or media) applicable to blockchain-powered businesses, the foundational rules are grounded in the Blockchain Act and AML/CFT legislation.

The Blockchain Act includes the following definitions:

• Tokens – information that may represent claims or membership rights, rights in property, or other absolute or relative rights and that is assigned to one or more trustworthy technology identifiers (includes any blockchain-based tokens designed to be utilised in the financial and other industries)
• Token container model (TCM) means that a token serves as a container, within which all types of rights may be placed, and it can cover securities, music rights, patents, utility coins, software rights, and more
• Physical validator – a trusted third party who serves as an intermediary between the contracting parties, and who confirms that the tokenised right represented online exists and the person who claims to possess the right offline is the lawful owner

To combat money laundering and terrorist financing, Liechtenstein is obligated to transpose the 4th and 5th EU Anti-Money Laundering Directives (4AMLD and 5AMLD) and relevant EU regulations. The main national laws are the Law on Professional Due Diligence for the Prevention of Money Laundering, Organised Crime and Financing of Terrorism (the Due Diligence Act) and the Ordinance on Professional Due Diligence for the Prevention of Money Laundering, Organised Crime and Financing of Terrorism (the Due Diligence Ordinance) which set out rules for KYC procedures in line with EU legislation.

The main due diligence rules:

• Monitor risks of the business relationships, including the transactions
• Ensure that the risks arising from the development of new products or commercial practices or from the use of new or developing technologies are assessed in advance and in accordance with regulations
• Regularly conduct a risk assessment to determine and assess the risks in relation to money laundering, organised crime and terrorist financing (must be well-documented)
• Effective IT-based systems must be used when monitoring business relationships in a way that is commensurate with the risks involved

As an EU member, Liechtenstein is also obligated to either transpose or directly apply other crypto-related EU regulations. In 2022, the Markets in Crypto-Assets (MiCA) regulation was approved by the Economic and Monetary Affairs Committee and should come into force between 2023 and the end of 2024. The aim of MiCA is to combat market misuse, prevent insider trading and in this way stabilise the crypto market. Moreover, the same year, the EU finalised the directive for the Pilot DLT Market Infrastructure Regulation (PDMIR) which will be applicable from March 2023 and will provide a legal framework for the trading and settlement of transactions in cryptoassets which are classified as financial instruments under the Markets in Financial Instruments Directive 2 (MiFID 2), as well as function as a regulatory sandbox for innovative experiments.

The Supervision of Crypto Businesses

Crypto companies intending to operate in Liechtenstein are obligated to apply for an appropriate crypto licence granted by the Liechtenstein Financial Market Authority (FMA) which is the official authority supervising the financial market. The FMA assesses every application on a case-by-case basis and may decide that no licence is required for a particular business model and may consequently advise that a different set of requirements and regulations apply.

The FMA supervises and therefore requires to register the following natural and legal persons who have a registered office or place of residence in Liechtenstein:

• Token issuers who professionally offer tokens to the public in the name of third parties, including, for example, trading venues that conduct initial coin offerings (ICOs) for their clients, and who publicly offer tokens in their own name (own issuance); also, who publicly offer the tokens in the name of third parties, but don’t do it professionally, must register if the value of the tokens issued during 12 months exceeds or will exceed 5 mill. CHF (approx. 5 mill. EUR); for any of these services a token issuer must apply separately
• Token generators who create original tokens on behalf of third parties
• TT key depositories and TT token depositories who safeguard tokens or private keys on behalf of third parties (e.g., in a safe or a collective wallet), including the execution of transactions for third parties (these services are typically provided by crypto exchanges or crypto wallet providers)
• TT protectors who hold tokens on TT systems in their own name on account of third parties (a licence pursuant to the Professional Trustees Act is also obligatory)
• Physical validators who ensure the enforcement of rights in accordance with the agreement, in terms of property law, or law applicable to goods represented in tokens on TT systems
• TT exchange service providers who exchange legal tender for tokens and vice versa, as well as tokens for other tokens, including ATMs where cryptocurrencies can be exchanged, but also persons who offer exchanges against their own book exclusively online
• TT verifying authorities who verify the legal capacity and the requirements for the disposal of a token, including services that ensure that only persons of legal age or those with a specific authorisation can purchase certain tokens
• TT price service providers who provide TT system users with aggregated price information on the basis of purchase and sale offers or completed transactions (it includes persons who publish independently calculated prices for tokens)
• TT identity service providers who identify the person in possession of the right of disposal related to a token and who record it in a directory
• TT agents who professionally distribute or provide TT services in the name of and for the account of a foreign TT service provider in Liechtenstein

The FMA levies an annual supervisory fee that applies to all authorised crypto businesses. The supervisory fee consists of a fixed basic fee and a varied additional fee and is limited to an annual maximum amount which normally is 100,000 CHF (approx. 100,000 EUR). For many types of regulated businesses, the basic fee is 500 CHF (approx. 500 EUR). The varied fee largely depends on the type of business model. For instance, for token issuers, a fee of 0,1% of the Swiss franc equivalent is levied on all cryptocurrencies and funds raised during the issuance where the date of the first offer serves as the reference date for the calculation of the exchange rate and the equivalent value as of 31 December of the year preceding the tax year is decisive for the tax.

If a supervised business has licences, authorisations, or recognitions for various supervised categories, or if the supervised business is subject to supervision by the FMA for various categories of economic activities, it’s subject to the fee for each of these categories. The full list of supervision fees is laid out in Annex 2 of the Financial Market Supervision Act (FMSA).

Advantages

Requirements for Crypto Licence Applicants

Legal and natural persons with a registered office or place of residence in Liechtenstein must not start offering any licensable services without an applicable licence granted by the supervisory authority and prior to entry into the TT Service Provider Register. If an applicant intends to conduct cross-border business (e.g., advertise abroad or approach clients abroad), it must notify the MFA in advance whether the business model is subject to licensing in the chosen foreign country.

The applicant must be a natural or legal person who’s capable of meeting the following requirements:

• Demonstrate the ability to conduct the planned economic activities
• The managing director must be reliable (no criminal convictions, violations of the provisions of the Act against Unfair Competition, the Consumer Protection Act or other relevant law)
• The managing director must be professionally suitable (sufficiently qualified for the intended responsibilities due to his or her training or previous career)
• Senior management is able to demonstrate competence, qualifications and relevant experience
• The company must have a registered office or place of residence in Liechtenstein
• The company must possess the required minimum capital
• The company must have an appropriate organisational structure with clearly defined areas of responsibility and procedures for dealing with conflicts of interest
• The company must have written internal procedures and control mechanisms in line with the type, scope, complexity and risks of the TT services provided (their adequate documentation is mandatory)
• If necessary, the company has special internal control mechanisms upon commencement of the activities to prevent the misuse of their products, services and recorded information, as well as be prepared to share reports with the authorities
• If the applicant intends to act as a TT protector, authorisation under the Trustee Act is a must
• If the applicant intends to carry out an economic activity that is subject to an additional licence requirement, it’s a must to have the appropriate licence

Initial capital requirements differ based on the type of economic activities:

• Token issuers
  • 50,000 CHF (approx. 50,000 EUR) if tokens with a total value of up to and including 5 mill. CHF (approx. 5 mill. EUR) are issued during a calendar year
  • 100,000 CHF (approx. 100,000 EUR) if tokens between a total value of more than 5 mill. CHF (approx. 5 mill. EUR) and up to and including 25 mill. (approx. 25 mill. EUR) are issued during a calendar year
  • 250,000 CHF (approx. 250,000 EUR) if tokens with a total value of more than 25 mill. CHF (approx. 25 mill. EUR) are issued during a calendar year
• TT key custodians – 100,000 CHF (approx. 100,000 EUR)
• TT token custodians – 100,000 CHF (approx. 100,000 EUR)
• TT exchange service providers
  • 30,000 CHF (approx. 30,000 EUR) if transactions between a total value of more than 150,000 CHF (approx. 150,000 EUR) and up to and including 1 mill. CHF (approx. 1 mill. EUR) are carried out during a calendar year
  • 100,000 CHF (approx. 100,000 EUR) if transactions with a total value of more than 1 mill. CHF (approx. 1 mill. EUR) are carried out during a calendar year
• Physical validators
  • 125,000 CHF (approx. 125,000 EUR), provided that the value of the items whose contractual enforcement is guaranteed by the physical validator doesn’t exceed the value of 10 mill. CHF (approx. 10 mill. EUR)
  • 250,000 CHF (approx. 250,000 EUR) if the value of the items whose contractual enforcement is guaranteed by the physical validator exceeds 10 mill. CHF (approx. 10 mill. EUR)

Applicants must also demonstrate the existence of special internal control mechanisms. The obligations resulting from these internal control mechanisms must be observed at all times, otherwise, a blockchain business is risking being fined or even suspended.

Token issuers must design the following internal control mechanisms:

• The disclosure of legally required information at any time during the token issuance and at least ten years thereafter
• The prevention of misuse with regard to the possibility of the recipient of tokens to waive basic information
• Execution of the token issue according to the terms of the legally required information
• Business continuity management – the maintenance of the operational activities in the event of interruptions during the token issuance

Token generators must design the following internal control mechanisms:

• Ensure that the right is correctly represented in the token during the lifetime of the token
• Ensure that the disposal of a token immediately results in disposal of the represented right
• Ensure that a concurrent disposition of the represented right is excluded both according to the rules of the TT system and the provisions of the law

TT key custodians must design the following internal control mechanisms:

• The establishment of appropriate security measures, which in particular prevent the loss or misuse of TT keys
• Safekeeping of customers’ TT keys separately from the business assets of the TT key custodian
• The maintenance of activities in the event of interruptions (business continuity management)

TT token custodians must design the following internal control mechanisms:

• The establishment of appropriate security measures, which in particular prevent the loss or misuse of TT keys
• The safekeeping of customer tokens separately from the business assets of the TT token custodian
• The clear assignment of tokens to customers
• The proper execution of customer orders
• Business continuity management – the maintenance of activities in the event of interruption

VT protectors must design the following internal control mechanisms:

• The establishment of appropriate security measures, which in particular prevent the loss or misuse of TT keys
• The custody of customer tokens separate from the business assets of the TT protector
• The clear assignment of tokens to customers
• The proper execution of customer orders
• Business continuity management – the maintenance of activities in the event of interruption

TT exchange service providers must design the following internal control mechanisms:

• The disclosure of comparable market prices of the traded tokens
• The disclosure of own buying and selling prices of traded tokens

TT price service providers must design the following internal control mechanisms:

• The transparency of the published prices
• Avoiding conflicts of interest when setting prices
• The disclosure of information about transactions with related parties to the users concerned

TT identity service providers must design the following internal control mechanisms:

• The use of suitable measures that make it possible to determine the identity of the person authorised to dispose of a token; it must be ensured that
  • in the case of natural persons or representatives of legal persons who are present in person, the identity is established on the basis of an official photo ID or by another, documented or to be documented proof of equivalent reliability
  • for representatives of legal entities, it must also be ensured that the necessary way of representation is established
  • in the case of natural persons or representatives of legal persons who aren’t present in person, other identification methods must be used that enable equivalent identification
• The correct assignment of TT identifiers to the rightful owner
• The secure storage of customer data

Physical validators must design the following internal control mechanisms:

• Since their liability rises in the event when the rights to goods guaranteed by them can’t be enforced in accordance with the contract, they should build internal control mechanisms to prevent such events

TT verification centres must design the following internal control mechanisms:

• Procedures and policies that ensure the verification services they offer are provided reliably

The application for the licence must be accompanied by the following information and documents:

• Name and address of the applicant (natural or legal person)
• Information about the planned TT service
• Information on the TT systems to be used as part of the planned TT service
• In the case of legal persons, information on the legal form of the applicant
• Well-documented evidence of meeting the above-mentioned requirements (e.g. certificates of no criminal record, proof of address, control mechanisms, and more)

The FMA requires that documents be submitted in the original or in a certified or apostilled form. Any changes to the submitted information must be reported to the FMA without delay prior to any public announcement. Please be reminded that we can assist you with the preparation and, if needed, updates, of all the required documentation in an efficient manner.

The FMA can waive the submission of certain information and documents if these are already available to the FMA due to the following reasons:

• The applicant already has a licence in accordance with Liechtenstein’s financial market supervision legislation
• The applicant is already registered for the provision of another TT service
• The applicant was previously registered for the same TT service

In addition to the requirements laid out in the TVTG, the applicants must comply with Liechtenstein’s AML/CFT regulations which include building internal risk-management policies that would enable the identification of customers and detect suspicious activities. Furthermore, reporting processes must be established to report suspicious financial activities to the respective authorities.

CRYPTO REGULATION IN LIECHTENSTEIN

The Process of Getting a Crypto Licence

The application form along with the required documents can be submitted to the FMA electronically. Depending on the quality of the submitted application, the application process can last up to three months. The quality requirements are met by following the specific instructions shared by the FMA.

It’s important to note that the registration of a regulated service is mandatory regardless of whether another licence has already been granted by the FMA. For instance, if a bank licensed in Liechtenstein decides to safeguard tokens for clients, it must additionally register as a TT token depositary. Also, the Liechtenstein crypto licence is effective exclusively in Liechtenstein and EU passporting isn’t possible.

The main steps of getting a crypto licence in Liechtenstein:

• Establish a company in Liechtenstein
• ​​Set up the software to be used for the production and provision of your crypto products or services
• Design required internal control mechanisms in accordance with legislation, including cybersecurity programmes
• Appoint a reporting officer for compliance obligations and hire other legally required local staff
• Complete and submit the application for authorisation that includes all required assessments for persons, systems and finances, as well as required documents

To submit the application, the applicant must first pay the application processing fee which is 1,500 CHF (approx. 1,500 EUR) and is non-refundable in the case of rejection of the application. If several services are to be registered, the first service costs 1,500 CHF (approx. 1,500 EUR) and every additional service is 700 CHF (approx. 700 EUR).

Open a Crypto Company in Liechtenstein

The most popular legal business structure in Liechtenstein is a Limited Liability Company (GmbH), governed by the Law on Persons and Companies of 1926. Initial capital requirements vary depending on the crypto business model and it can be established by at least two shareholders within two weeks. For such companies, it’s obligatory to rent an office in Liechtenstein, which would have the compliance department, as well as hire local personnel. Every Liechtenstein company is obligated to pay an annual fee of 1,200 CHF (approx. 1,200 EUR).

Other features of the Liechtenstein Limited Liability Company (GmbH):

• The whole company can be owned by foreigners
• It can be led by one director who must be a resident in Liechtenstein
• Shareholders’ names aren’t published in any publicly available records
• Bearer shares can be issued for advanced privacy

Key steps of opening a company in Liechtenstein include:

• Choosing a unique name which must be approved in advance by the Office of Justice, Commercial Register Division
• Preparing the required documents (Articles of Association, information about owners and directors, etc.), including translating and notarising them
• Opening a local bank account
• Transfering required initial share capital
• Submitting the application form along with the documents to the Commercial Register
• Submitting an application for a crypto licence to the FMA

Crypto Taxes in Liechtenstein

Depending on the type of a token and rights ascribed to that token, different tax treatment applies to a crypto company.  ​​If the company’s annual turnover exceeds 100,000 CHF (approx. 100,000 EUR), registration with the Tax Administration is required. Even if a crypto company isn’t subject to mandatory taxation, it must maintain accounting records for tax reporting.

Essential tax rules for crypto companies:

• Profits sourced from trading such tokens are tax-exempt as Liechtenstein doesn’t tax capital gains from trading with participations where the participation rate is a parameter of a trading activity concerning the amount of liquidity present in the market
• Utility tokens are treated as conventional commodities, and all trading profits are taxable as trading income at the rate of the Corporate Income Tax which is 12,5%
• Payment tokens are treated as fiat money, and trading earnings are considered to be taxable trade income

Audit Requirements

In Liechtenstein, a statutory audit is mandatory for companies that exceed certain parameters, however, most small businesses are exempt from audit. Instead, they can initiate an audit inspection, also known as a review. Compared to a regular statutory audit, such a review has a less extensive scope and depth.

If a crypto company exceeds at least two of the following thresholds in two consecutive financial years, it will be subject to statutory audit:

• Total assets – 7,4 mill. CHF (approx. 7,4 mill. EUR)
• Net sales proceeds – 14,8 mill. CHF (approx. 14,8 mill. EUR)
• The annual average number of full-time employees – 50

If you’re prepared to become a crypto entrepreneur in one of the most advanced and supportive jurisdictions, our highly qualified and experienced consultants here at Regulated United Europe (RUE) will be delighted to equip you with the necessary knowledge that will help you lay your path to success. We very well understand and closely monitor crypto-related legislation in Liechtenstein and the rest of the EU and thus can guide you through the process of obtaining a crypto licence, including developing internal AML/CFT procedures and establishing a new company. Moreover, we’re more than happy to assist you with financial accounting and tax optimisation. Book a personalised consultation now to start a new journey in the cryptocurrency industry.

Also, lawyers from Regulated United Europe provide legal services for obtaining a crypto license in Europe.

Embracing Innovation: Securing a Crypto Exchange License in Liechtenstein 2024

Liechtenstein, known for its progressive stance on blockchain and cryptocurrency, offers a unique environment for crypto businesses seeking to leverage robust and clear regulatory frameworks. This article explores the nuances of obtaining a crypto exchange license in Liechtenstein, detailing the regulatory landscape, application process, and advantages for crypto businesses in this jurisdiction.

Regulatory Environment in Liechtenstein for Crypto Businesses

Liechtenstein’s Financial Market Authority (FMA) plays a critical role in the oversight of crypto-related activities, supported by comprehensive regulations such as the Token and VT Service Providers Act, commonly known as the Blockchain Act. This legislation provides a detailed legal framework for the operation of blockchain and crypto businesses, ensuring clarity and security for both operators and consumers.

Types of Crypto Licenses in Liechtenstein

Liechtenstein offers several types of crypto licenses to cater to various aspects of the digital asset market:

• Crypto exchange license in Liechtenstein: Allows businesses to offer exchange services between cryptocurrencies and fiat currencies.
• Crypto broker license in Liechtenstein: Enables companies to act as intermediaries in crypto transactions.
• Crypto trading license in Liechtenstein: For businesses that engage directly in the buying and selling of cryptocurrencies.
• VASP crypto license in Liechtenstein: Aimed at virtual asset service providers, covering a broader range of crypto services.

Applying for a Crypto License in Liechtenstein

The application process requires comprehensive documentation, including business plans, AML/CFT policies, and proof of financial stability. The FMA assesses each application rigorously to ensure compliance with local and international standards.

Cost of Crypto Licensing in Liechtenstein

The crypto exchange license in Liechtenstein cost can be significant, but it is competitive compared to other European jurisdictions. Businesses must consider these costs as an investment in accessing a highly regulated and stable environment that facilitates safe and legal crypto transactions.

Advantages of a Liechtenstein Crypto License

Securing a crypto license in Liechtenstein offers numerous advantages, including access to the broader European Economic Area (EEA) and a reputable regulatory regime that enhances business credibility. The clear legal framework also provides businesses with the confidence to operate within a secure market.

Investment Opportunities in Liechtenstein’s Crypto Sector

Despite common perceptions, Liechtenstein is not necessarily the home of the cheapest crypto license in Liechtenstein. However, the principality offers substantial economic incentives, a stable political environment, and an innovative financial sector, making it an attractive location for crypto businesses.

Acquiring an Existing Crypto License

For those looking for a quicker entry into the market, the option to purchase an existing crypto exchange license in Liechtenstein for sale might be available. This route requires meticulous legal review and understanding of the ongoing compliance obligations.

Conclusion: Liechtenstein continues to lead as an innovative and supportive environment for cryptocurrency enterprises. Obtaining a crypto exchange license in Liechtenstein is not just about regulatory compliance; it’s a strategic entry into a thriving and dynamic financial technology ecosystem. For businesses looking to establish or expand their presence in the crypto industry, Liechtenstein offers a combination of regulatory security and market opportunity that is hard to match.