Set Up a Cryptocurrency Hedge Fund in Liechtenstein
Updated on Monday 22nd July 2019
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Liechtenstein is set to become one of the leading cryptocurrency markets in Europe. Even though Liechtenstein is one of the smallest jurisdictions at a global level, it has a solid financial market and the country’s main financial regulator, the Financial Market Authority, is actively involved in creating a regulatory framework for cryptocurrency investments.
At the level of 2018, the Financial Market Authority approved three alternative investment funds that were set up with the purpose of investing in cryptocurrencies; it is necessary to know that Liechtenstein is currently comparable with Switzerland, being one of the main competitors for financial activities developed in the field of cryptocurrencies.
Investors who are interested in how to start a hedge fund in Liechtenstein for developing cryptocurrency operations should know that they can find the necessary support from the Financial Market Authority (FMA) on any business model involving cryptocurrencies, as the institution is directly involved in assisting investors starting a local investment project.
What is the law on cryptocurrencies in Liechtenstein?
Currently, the term cryptocurrency is not defined under the local legislation. Those starting a hedge fund in this country, or another type of investment fund involved in cryptocurrency activities, must consider the fact that the FMA considers that cryptocurrencies are seen as virtual currencies that do not fall under a specific control. Investors must consider the following as well:
- the unofficial definition of the term cryptocurrency also involves blockchain activities;
- the issuance of cryptocurrencies in Liechtenstein does not need an approval;
- this is also available when we refer to the usage of cryptocurrencies in this country;
- however, depending on the business model of any cryptocurrency hedge fund in Liechtenstein, various licensing requirements may be needed;
- if the cryptocurrency activity needs a license, the main institution involved in the licensing process is the FMA.
However, it is necessary to know that in the near future, Liechtenstein will benefit from a clear legal framework concerning investments in cryptocurrencies, as the Ministry for General Government Affairs and Finance created a report on a proposed legislation regarding the regulation of this sector, known as the Blockchain Act.
At the level of June 2019, the Blockchain Act was discussed in the local parliament; the local authorities have voted in favor of the proposed legislation, but additional procedures have to be completed in order for the proposed document to become legally applicable.
What does the Blockchain Act regulate in Liechtenstein?
The Blockchain Act in Liechtenstein is set to regulate a wide range of cryptocurrency activities and operators. Thus, it can apply to a business set up as cryptocurrency hedge fund startup, but also to other fintech companies, blockchain developers or to initial coin offerings activities.
In Liechtenstein, such operations are all included under a broad term, known as trustworthy technology. Persons involved in any operations related to the term trustworthy technology have to comply with a set of basic requirements (on matters such as the minimum capital investment, the business model, the company’s organizational structure and numerous others).
What is the market size of the Liechtenstein investment funds?
With a population of approximately 37,000 persons, Liechtenstein has a very well developed financial market, even compared to larger countries. The country can be an ideal location for those who are interested in how to start a fund in a foreign jurisdiction, the cryptocurrency sector being on the rise here. The investment fund market in Liechtenstein is characterized by the following:
- at the level of March 2017, the country accounted for a total of 690 investment funds;
- they held assets under management with a total value of CHF 54,6 billion;
- it also had 112 promoters of administered funds and 5 fund auditors;
- most of the investment funds in Liechtenstein were set up as alternative investment funds (352 such funds);
- the country had 328 funds registered as undertakings for collective investments in transferable securities (UCITS).
The value of the total assets of the investment vehicles operating as alternative investment funds was of CHF 18,7 billion in 2017, while the value of UCITS funds stood at CHF 29 billion. In comparison, in 2012, the total value of the investments funds registered here was of only CHF 36,1 billion.
Businessmen are invited to contact our team of affiliates in Liechtenstein for complete information on how to start an investment fund in the cryptocurrency sector. Our specialists can provide full legal representation on the registration of a cryptocurrency hedge fund in Liechtenstein.