LIECHTENSTEIN: An Introduction

Liechtenstein, a constitutional monarchy located between Austria and Switzerland, is renowned for its financial stability and legal frameworks, making it a prominent global economic player. With one of the highest GDP per capita in the world, Liechtenstein’s AAA credit rating and absence of foreign debt contribute to its financial resilience and reputation as a hub for innovation. As a member of the European Economic Area (EEA), the country provides seamless access to the EU’s market of 27 member states, while offering a favourable tax regime, including a low corporate tax rate of 12.5% and extensive Double Taxation Agreements (DTAs). Its customs union with Switzerland ensures economic stability through the use of the Swiss Franc and facilitates trade.

Liechtenstein has also emerged as a leading fintech hub, leveraging its robust financial and legal systems, strategic integration into European markets, and innovative regulatory frameworks. The country’s proactive stance on blockchain and cryptocurrency regulation, coupled with its access to the European Economic Area (EEA), has made it an attractive hub for fintech businesses navigating the evolving digital economy.

Liechtenstein’s success in fintech is underpinned by its progressive regulatory approach. The introduction of the Blockchain Act, officially known as the Token and Trusted Technology Service Provider Act (TVTG), in 2020, positioned the country as a pioneer in establishing comprehensive legal frameworks for tokenised assets and blockchain technology. This legislation provides legal clarity and security, addressing areas such as ownership rights, tokenisation, and the operation of trusted technology service providers.

Building on this foundation, Liechtenstein has aligned its regulatory framework with the European Union’s Markets in Crypto-Assets Regulation (MiCAR), set to be fully implemented in February 2025. MiCAR offers a harmonised legal framework for crypto-assets across the EU, enabling Liechtenstein-licensed businesses to provide services such as crypto trading platforms, custody, and wallet solutions across all member states. This “passporting” capability significantly reduces regulatory and administrative hurdles for businesses seeking to expand throughout Europe.

Furthermore, the FMA has a special fintech department responsible for cryptocurrency and blockchain regulation and fintech, as well as for regulation of any future financial technologies. Additionally, a special government body responsible for facilitation of fintech and blockchain development was established – Stabsstelle für Finanzplatzinnovation und Digitalisierung (Office for financial centre innovation and digitisation), and Liechtenstein has various government-led innovation formats aimed at optimising the framework conditions for entrepreneurial activities, with a particular focus on fintech. An example is the “Innovation Club,” which operates as a fast-track platform for generating ideas to improve overall entrepreneurial framework conditions.

Liechtenstein also offers a supportive environment for fintech companies, underpinned by favourable tax policies and flexible corporate law. The flat income tax rate for legal entities is set at 12.5%, with a minimum income tax of CHF1,800. Businesses can reduce taxable profits by booking 4% of corporate equity capital as an expense, effectively lowering the tax rate below 12.5%. Losses are typically allowed to be carried forward indefinitely. Furthermore, dividends or capital gains from the sale or liquidation of investments in shares or similar equity instruments are generally exempt from taxation, irrespective of the holding duration or amount. These features provide structural advantages for holding companies and international investments. The country’s corporate law, while historically established, is structured to allow flexibility and supports a variety of company forms. This adaptability is particularly significant for the fintech sector, where evolving business models and innovative organisational requirements often necessitate customised legal and corporate frameworks.

Recent Developments

One notable recent development is Liechtenstein’s preparation for the full implementation of MiCAR. This regulatory alignment solidifies the country’s fintech ecosystem and positions it as an ideal base for businesses seeking seamless access to the European market. The Financial Market Authority (FMA) of Liechtenstein has proactively streamlined the licensing process for crypto-asset service providers (CASPs), leveraging its expertise from the Blockchain Act. This ensures efficient and transparent regulatory procedures, giving businesses the confidence to operate within a stable and well-regulated environment. The forthcoming implementation of MiCAR is expected to bring significant benefits to the fintech industry in Liechtenstein. By harmonising rules for crypto-assets across the EU, the regulation ensures a level playing field for businesses and enhances investor protection. Notably, in this context, the FMA of Liechtenstein already began accepting applications for MiCAR licences as of October 2024, enabling businesses to align their operations ahead of the regulation’s full implementation.

Liechtenstein’s fintech landscape continues to evolve with further recent developments.

• Regulatory technology firms have gained attention, offering advanced solutions for compliance, risk management, and regulatory reporting. These firms have attracted investments, including Series A and B financing rounds.
• Traditional banks in Liechtenstein, known for their expertise in blockchain and crypto-asset services, continue to play an increasingly pivotal role in the fintech ecosystem. These institutions are regarded as crypto-friendly and cater to clients involved in blockchain and fintech ventures.
• Fintech companies focusing on digital payments and banking solutions have also seen notable investment activity. Over the past year, a new payment services bank was licensed, and preparations are underway to license a new digital assets bank.
• Additionally, the country has seen a rise in fintech companies developing advanced layer-one blockchain infrastructure, enhancing the foundation for secure integration and application of blockchain technologies across financial services.
• Liechtenstein also hosts a growing number of charitable crypto foundations. These organisations are dedicated to promoting and supporting blockchain technology, Web3 initiatives, and other pioneering technologies sustainably and over the long term.