It has been a wild, crazy journey – in the past decade, events in the crypto world have had all the elements of a Hollywood blockbuster. First, we had the origin story: Satoshi Nakamoto, the enigmatic author of the legendary Bitcoin white paper published in 2011, who has remained shrouded in mystery. Then, we had The Wolf of Wall Street era – the wide-eyed optimism, hype, and bluster of the crypto boom in 2017. Nowadays, the crypto market is more reminiscent of a grisly survival movie like The Revenant, as blockchain firms battle to escape the crypto winter after being mauled by the bear market.
So what comes next? You’ve probably never seen a Hollywood blockbuster about prudent, incremental government regulation. With good reason – let’s face it, that would be a really boring movie. But the fact is that most industry insiders now say that if blockchain is to enter the mainstream and fulfill its potential, it needs to leave all the drama behind. For this to happen, a stable regulatory foundation will be essential.
That’s why a number of jurisdictions are now in a race to create a solid legal foundation for the next wave of blockchain innovation. At the top of the pack, two neighbouring countries at the heart of Europe, Switzerland and Lichtenstein, are often mentioned as regulatory pioneers.
Indeed, despite the ravages of the crypto winter, the blockchain sector has actually expanded in Switzerland and Lichtenstein, with the number of firms using blockchain technology increasing 20% in 2018. This can be partially attributed to significant progress on the regulatory front.
In December 2018, the Swiss government published a wide-ranging blockchain strategy, which aimed to create the legal underpinnings of the blockchain industry. Unlike territories like Lichtenstein and Malta, which opted to create bespoke legislation, Switzerland has opted to amend existing legislation to accommodate the blockchain sector. The aim is to allow emerging blockchain firms to innovate and grow by integrating them into the wider Swiss financial market, which has thrived for decades.
In contrast to the regulatory systems in the US and EU, Swiss financial laws tend to be based on broad principles rather than prescriptive definitions. This gives the financial regulator FINMA a considerable degree of leeway to exercise discretion in individual cases. This flexibility can be a huge asset when trying to protect investors and eliminate fraud, without curtailing the creative freedom of innovative startups.
For those launching a security token offering (STO), it will soon be possible to register with FINMA so that tokens can be sold and traded legally. In addition, proposed amendments would give smart contracts a foundation in law, so that they can be used to legally define the rights of token holders.
Lichtenstein is a tiny microstate nestled in the mountains on Switzerland’s eastern border. Although both Switzerland and Lichtenstein share the same currency, there are some pretty major differences in terms of how the countries are run: while Switzerland has one of the most decentralised political systems in the world, Liechtenstein likes to keep it old school with a constitutional monarchy.
But while this all might sound a bit 18th Century, the current Crown Prince, Alois, is actually very tech savvy and enthusiastic about blockchain technology. Unlike Switzerland, Lichtenstein has opted to create tailor-made legislation to regulate the industry. The Blockchain Act focuses on regulating the transfer of digital assets and defining trusted technologies that can be used by businesses seeking to leverage distributed ledger technology (DLT).
Another major advantage of Liechtenstein for firms launching an STO is that unlike Switzerland, it is a member of the European Economic Area (EEA). Thus, as long as the project gains regulatory approval from the Financial Market Authority of Liechtenstein, the security tokens can legally be traded throughout the EU and in the EFTA member states of Iceland, Norway and Switzerland. In addition, the token is given an International Securities Identification Number (ISIN) which means that it can be traded on traditional financial markets like a conventional security.
The best of both worlds
It is for these reasons that Curio Invest opted to create a base both in Switzerland and Liechtenstein. While Switzerland offers the thriving blockchain ecosystem of crypto valley, Liechtenstein provides a unique way to launch a fully legally compliant and tradable asset-backed security token. By leveraging the best of both worlds, Curio is launching one of the world’s first tokenized supercars: an STO directly backed by a Ferrari F12tdf. Click here to find out more.