Across discussions with policymakers, financial institutions, technology leaders and regulators, one message became increasingly clear:
Europe has entered the next phase of blockchain development.

This phase is no longer about defining the potential of the technology.
It is about operationalising it.

From Regulation to Implementation

With the full application of the Markets in Crypto-Assets Regulation (MiCA) in December 2024, Europe has established the world’s first comprehensive regulatory framework for digital assets. Markets in Crypto-Assets Regulation (MiCA)

This represents a significant achievement in providing legal certainty, investor protection and a harmonised market environment across Member States.

However, as discussions at Paris Blockchain Week highlighted, regulation alone does not create competitiveness.

The next challenge for Europe lies in translating regulatory clarity into operational capability — across custody, settlement infrastructure, cross-border execution and institutional adoption.

A New Strategic Layer: Infrastructure and Sovereignty

A second key theme emerging from Paris is the growing importance of blockchain as a strategic infrastructure layer, rather than a standalone innovation domain.

This is particularly evident in the debate around:

• euro-denominated stablecoins
• tokenised deposits
• and the future of digital settlement systems

These developments reflect a broader shift:
blockchain is increasingly understood as part of Europe’s financial and digital sovereignty architecture.

At the same time, the long-standing tension between decentralised systems and European data protection frameworks is beginning to evolve. Recent regulatory developments, including new guidelines on GDPR application to blockchain-based systems, signal a more technically grounded and forward-looking approach.

From Pilots to Production

Another structural insight from Paris Blockchain Week is the transition of tokenisation from pilot use cases to production-ready infrastructure.

Tokenised real-world assets, interoperable identity systems and privacy-preserving architectures are no longer conceptual discussions. They are increasingly becoming prerequisites for institutional-scale deployment.

This transition introduces a new set of requirements:

• interoperability standards
• common data models
• trusted infrastructure frameworks
• and scalable governance mechanisms

Without alignment in these areas, Europe risks fragmentation across jurisdictions, sectors and technical implementations.

Coordinating Europe’s Blockchain Ecosystem

Europe’s strength has always been its ability to define regulatory frameworks grounded in values such as transparency, accountability and fundamental rights.

Its challenge, however, remains coordination.

The European Blockchain Association (EBA) has consistently emphasised the importance of aligning stakeholders across industries, regions and governance levels. In a landscape that is inherently decentralised, fragmentation is not only a technical risk — it is a strategic one.

As blockchain ecosystems mature, the need for neutral platforms that facilitate coordination, standardisation and dialogue becomes increasingly critical.

Actions for Europe

In response to the insights emerging from Paris Blockchain Week, the European Blockchain Association has developed a strategic action framework outlining seven priority areas for Europe’s next phase of blockchain development:

• Moving from rulemaking to operability
• Building euro-denominated digital settlement infrastructure
• Standardising tokenisation frameworks
• Advancing privacy-preserving identity systems
• Establishing trusted infrastructure standards
• Strengthening education and board-level literacy
• Coordinating Europe’s ecosystem across sectors and borders

These actions are intended not as abstract recommendations, but as a practical foundation for policymakers, institutions and industry leaders working to translate Europe’s regulatory leadership into global competitiveness.

From Insight to Impact

Europe has taken a leading role in shaping the regulatory foundations of the blockchain economy.

The opportunity now lies in building on this foundation — by developing the infrastructure, coordination mechanisms and institutional capabilities required for large-scale adoption.

To support this process, the European Blockchain Association has published a comprehensive infographic:

“Actions for Europe — Learning from the Paris Blockchain Week”

The infographic provides a structured overview of key insights and priority actions and is designed to support internal discussions, strategic planning and policy dialogue across Europe’s blockchain ecosystem.

Download

The full infographic is available for download

We invite policymakers, institutions, and ecosystem stakeholders to use, share and build upon this framework as part of a collective effort to strengthen Europe’s position in the global blockchain landscape.

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For years, the EBA has advocated for a modernised, technically grounded approach to GDPR enforcement that reflects the operational realities of public blockchains like Ethereum. With the publication of Guidelines 02/2025, the EDPB takes a crucial step forward—acknowledging the unique legal-technical challenges posed by decentralised infrastructures.

🔍 Key Takeaways from the EDPB Draft

• Decentralisation is not deregulation. The EDPB confirms that GDPR applies fully to permissionless blockchains, with nuanced role assignments for node operators, validators, and smart contract developers.
• The concept of ‘controller’ must evolve. Traditional interpretations of data controllership struggle to fit the modular architectures of modern blockchain systems. The guidelines call for deeper analysis of actors across execution, consensus, and data availability layers.
• Erasure in immutable systems is possible—by design. The EDPB highlights metadata erasure and off-chain storage as viable solutions to honour the right to be forgotten, even when on-chain data remains permanent.
• Privacy-by-default must be built in. From zero-knowledge proofs to enshrined proposer-builder separation (ePBS), the guidance underscores the importance of privacy-enhancing technologies (PETs) in meeting GDPR obligations.

📄 EBA’s Full Technical-Legal Response

In response to the consultation, the EBA submitted a detailed analysis grounded in real-world blockchain architectures, particularly Ethereum. Our reply includes:

• A taxonomy of actors and responsibilities under modular network designs.
• Legal and technical interpretations of execution-layer, consensus-layer, and data availability-layer roles.
• A harmonised GDPR compliance framework tailored for decentralised systems.
• Policy recommendations for avoiding controller ambiguity and ensuring practical implementation of privacy rights.

Through protocol innovations such as zk-SNARKs, PeerDAS, and fully homomorphic encryption, we demonstrate that decentralisation and data protection are not mutually exclusive—but must co-evolve through coordinated effort.

🤝 Call for Ongoing Collaboration

As Europe prepares to implement the AI Act and expand its Digital Decade agenda, this dialogue between regulators and decentralised system developers is more vital than ever. Legal certainty must not come at the cost of technological progress—or vice versa.

The EBA remains committed to supporting regulatory bodies, privacy advocates, and blockchain communities in crafting a compliance-first, innovation-forward future for Europe.

➡️ [Read the Full EBA Response Here (PDF)]
➡️ Access the EDPB’s Draft Guidelines 02/2025

Tags: #Blockchain #GDPR #EDPB #Web3 #PrivacyTech #DigitalSovereignty #Ethereum #CryptoPolicy #DataProtection #Decentralisation #EBA

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About DLT Austria

Founded in 2020, DLT Austria has quickly emerged as a prominent voice in the Austrian blockchain space. With a growing network of over 60 members, including startups, industry leaders, and educational partners, DLT Austria is dedicated to advancing decentralized technologies as foundational infrastructure for the digital economy.

The association’s primary focus is on promoting awareness and understanding of blockchain among key stakeholders, including political decision-makers, business leaders, and the broader public. Through education, advocacy, and collaboration, DLT Austria is helping shape Austria’s blockchain landscape and ensuring that the country remains at the forefront of technological innovation.

EBA and DLT Austria: A Natural Partnership

As the European Blockchain Association, the EBA serves as a neutral, pan-European platform for blockchain-related initiatives, connecting businesses, research institutions, startups, and policymakers across Europe. The EBA’s mission is to facilitate coordination, drive innovation, and strengthen the European blockchain ecosystem, while also fostering international cooperation.

This partnership with DLT Austria is a natural alignment of our shared goals. DLT Austria’s deep understanding of the Austrian blockchain ecosystem and its focus on practical education and collaboration complements the EBA’s broader European vision. Together, we can strengthen cross-border collaboration, promote blockchain adoption, and help shape the regulatory and technological frameworks needed to support blockchain-based solutions.

Areas of Focus for the Partnership

This collaboration is built on several core pillars, all of which aim to enhance the blockchain ecosystem in Europe:

1. Education & Awareness: Both organizations are committed to educating and informing key stakeholders about the opportunities and challenges of blockchain technology. This includes outreach to political decision-makers, businesses, and the public to create a deeper understanding of how blockchain can drive digital transformation.
2. Cross-Border Collaboration: By joining forces, the EBA and DLT Austria aim to strengthen collaboration between European blockchain stakeholders. This includes fostering international partnerships, supporting cross-border initiatives, and creating new opportunities for innovation.
3. Regulatory Advocacy: Both organizations will work closely with policymakers at the European and national levels to ensure that the regulatory environment supports the growth and adoption of blockchain technologies. This includes engaging in dialogue around key regulatory issues such as data privacy, digital assets, and decentralized governance.
4. Sustainability & Long-Term Innovation: A key focus of this partnership is to promote sustainable blockchain solutions that drive long-term innovation. The EBA and DLT Austria will work together to ensure that blockchain technologies contribute to a more transparent, efficient, and inclusive digital economy.

Call to Action

This partnership represents a significant step forward in our collective effort to drive blockchain adoption and shape the future of digital innovation. The EBA and DLT Austria invite businesses, startups, policymakers, and blockchain professionals across Europe to join this initiative. By working together, we can accelerate the development of blockchain technologies and unlock new opportunities for growth and transformation in a wide range of sectors.

We encourage all stakeholders interested in contributing to this ecosystem to get involved, whether through partnerships, educational initiatives, or engagement in policy discussions. Together, we can build a robust and sustainable blockchain ecosystem that supports the digital future of Europe.

For more information on how to get involved or to learn more about our initiatives, please contact the EBA or DLT Austria.

Next Steps – Let get things done

This partnership between the European Blockchain Association and DLT Austria marks a new chapter in the development of blockchain technologies in Europe. By working together, we aim to create an inclusive, forward-looking environment where blockchain can thrive and contribute to the digital transformation of the European economy. We look forward to the opportunities this collaboration will bring and to the continued growth of the blockchain ecosystem.

#Blockchain #DigitalTransformation #EBA #DLTAustria #EuropeanBlockchain #Innovation #Sustainability #CrossBorderCollaboration #BlockchainEducation

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The European Blockchain Association, in accordance with the EU Blockchain Manifesto, has issued an open letter to EU Institutional Representatives, calling for a concerted effort to transition from Web2 to Web3. The letter aims to highlight the importance of blockchain technology in fostering digital trust services, supporting new digital communities, and enhancing the European Union’s internal market competitiveness and strategic autonomy.

The open letter is divided into three distinct parts, each addressing a crucial aspect of the proposed transition:

1. Strategic Priority: The first part of the letter reinforces the European-level messaging of blockchain technology as a strategic priority for the Union. It emphasizes the need to deliver on a strategic roadmap that anchors existing public infrastructure projects, such as the European Blockchain Services Infrastructure (EBSI), the European Digital Identity Wallet (EUDIW), and the digital product passport (DPP), as vehicles for enabling market services.
   
2. Public-Private Partnerships: The second part re-imagines a strategic role for public-private partnerships in delivering on the target roadmap. By integrating and extending the viability of the aforementioned public infrastructure projects, these partnerships can play a crucial role in driving the adoption of blockchain technology and tokenized services across the EU.
   
3. Policy Recommendations: The third and final part of the letter focuses on a series of high-level policy recommendations aimed at scaling blockchain and tokenized services in Europe. These recommendations are designed to create a favorable regulatory environment that encourages innovation and growth in the blockchain sector.

The open letter is addressed to policymakers at both the National and European levels, recognizing the pivotal role that rotating Council Presidencies play in delivering policy initiatives. By engaging with decision-makers at all levels, the European Blockchain Association hopes to build a broad consensus around the importance of embracing Web3 technologies.

The transition from Web2 to Web3 represents a significant opportunity for the European Union to assert its leadership in the digital space. By harnessing the power of blockchain technology and tokenized services, the EU can create a more competitive, secure, and strategically autonomous internal market.

As the open letter makes clear, the time for action is now. The European Blockchain Association urges EU representatives to seize this opportunity and work together to create a regulatory framework that supports the growth and adoption of Web3 technologies across the Union.

To read the full open letter and learn more about the European Blockchain Association’s vision for a Web3-enabled future, please visit click here.

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📝 Join this collective vision by reading and signing our manifesto here

The European Union (EU) is at risk of falling behind North America and Asia in the global race for the future digital economy, as demonstrated by the reliance on foreign digital service providers and the limited number of unicorns and start-ups compared to its competitors. This race is characterised by the development of innovative technological advancements that bring unique opportunities, principles and embedded values. While we recognise the intrinsic value of technologies like artificial intelligence, virtual reality and robotics, we believe that blockchain will serve as the trust layer for the convergence of all these technologies, allowing them to build upon each other and form the framework of the future digital economy.

You can also download the manifesto here

A short summary of the key points we want to urge the EU to consider:

• The EU must now increase its focus on harmonising its policies and services, promoting standardisation globally as well as internally between European states and bodies.
• By harnessing blockchain’s potential, the EU has the opportunity to improve global trade transparency, bolster cybersecurity, and establish advanced verification systems by having trade documents and certifications of origin running on blockchain networks.
• The EU should continue to consolidate its data economy, offering universally accessible digital services ranging from digital identities to digital assets provided by both private and public sectors. It should leverage advanced cryptographic techniques including zero-knowledge proofs – allowing the sharing of sensible data proofs while remaining compliant with privacy and AML requirements. 
• There is an opportunity to leverage these tailwinds to reinvent our economy’s incentive structures and business models while adhering to the EU’s identity rights and values.
• To fully leverage blockchain capabilities, it is vital to allocate dedicated funds to develop blockchain applications for the real economy, engage closely with industry participants, including Web3-native companies, advance educational initiatives to increase literacy around these technologies, and promote transparent dialogue and knowledge-sharing to fight misconceptions.

Let us all champion an EU that protects the holistic well-being of every individual and safeguards human rights and freedoms for generations to come.

The post A Manifesto for Blockchain – Embracing its Potential in the European Union appeared first on European Blockchain Association.

Julius, before we dive deeper into the current issues, could you explain shortly, what Proof of Stake is and what Staking Facilities does? 

In very general terms, Proof of Stake (PoS) is a next-generation blockchain technology that removes some of the shortcomings  of so-called “Proof of Work” blockchains such as Bitcoin which, due to the way they agree on transactions, have notoriously high energy consumption. The second largest Blockchain, Ethereum, is currently transitioning from PoW to PoS. In a PoS Blockchain, special nodes called validators are responsible for the provision of infrastructure as well as proposing and validating new blocks and appending them to the blockchain. Staking Facilities is an infrastructure provider for various projects on the web3 tech stack and a validator for PoS blockchains. Hence, together with other validators, we ensure the blockchains’ security by monitoring its accuracy, establishing validity, guaranteeing availability, and provisioning the infrastructure for it to run on. 

Why did you decide to become a member of the EBA? 

In a young industry like ours, we often operate in unchartered territory. Standards, rules, and regulations still need to be defined. We feel it is important to work cross-industry on these topics to close the gap between technology and regulation. Also, coopetition and joining forces are inherent principles to decentralised systems, so joining the EBA and working closely with other entities was simply a natural move for us. 

At the EBA, you are engaged in the EUPoS Working Group. What are the goals of the group?

In 2020, it became very clear to us that the current regulation is addressing the wrong issues and that this could in the worst case actually endanger the security of our systems. We acknowledge that many regulators have good intentions but see that there is a lack of understanding of these decentralized systems. Therefore, one important goal of the EUPoS working group is to assist regulators in understanding the core values and processes of this new technology. By doing so, we hope to provide the path for thoughtful regulation. The Staking Working Group Position Paper for example was one first step to give players in the staking infrastructure industry  a trusted knowledge base and playbook, which they can use when approaching and communicating with regulators. A long term goal is to help anyone in the industry to make arguments for regulation which at a minimum doesn’t hurt the competitiveness of european validators and prevent the implementation of regulation which would hurt the industry and endanger the innovations that DLT can bring to the European population.

What are the pressing issues the Working Group is dealing with right now?

Right now, our two most pressing issues are the definition of “voting” and the application of value added tax (VAT) in regulation of the staking infrastructure world. In some PoS networks validators can act as a technical representative and vote on behalf of their clients on issues regarding the development and governance of the network and the ecosystem, i.e. software updates or the implementation of regulations. In some PoS systems, the network token grants its owner the right to participate in the above mentioned network decisions. The German Federal Financial Supervisory Authority, BAFIN, expressed its opinion to one of the EBA members that these votes could fall into administration of crypto assets in its broadest sense. As a result staking infrastructure providers would need a respective, quite expensive, “crypto custody” banking licence to be able to vote. 

For one thing, this comparison is not accurate. In PoS networks voting rights are separate from custody rights, but most importantly our services are at its core technical and not financial. We provide infrastructure. If you compare a PoS network to a bar that serves drinks in glasses that are charged with a deposit, we as staking infrastructure providers handle the deposit system, we don’t run the finances. But secondly, this regulation endangers the functioning of the system and limits the services of staking infrastructure providers. If staking infrastructure providers cannot afford the licence, they cannot vote. If many validators in the network can’t vote, it may lead to situations where critical updates cannot be made because there are not enough votes. It also puts more of these votes which are often very technical in nature in the hands of people who may or may not have the technical background to deliver opinions with an adequate depth of knowledge. Delegated voting is intended to empower non-technical users to delegate their voting power to a third party like a validator who is a technical expert on the topic. This ultimately creates the positive effect that validators compete for the trust of their delegators. In general, the security in decentralized networks increases with the number of participants. So, it must be our goal to encourage participation and enable voting for as many validators as possible. The need for a licence, however, promotes centralization and limitation to few powerful validators. The current regulatory opinion could ultimately have the opposite effect of what BAFIN intended: instead of protecting the customers funds it could put them at risk. 

As for the VAT issue, we face a fundamental problem: pseudonymity in permissionless networks plus a global economy. We know which of our customers makes which transaction, but we don’t know and cannot know the identity or the location of our customers. We simply can’t say which tax regulation would apply to which customer. This is exactly what is intended in these permissionless networks. The reason, once again, is that this permissionless approach heightens the security of the network. However, to be able to vote, you need tokens and tokens can only be acquired through strictly regulated exchanges. So there is regulation in place already. Staking infrastructure providers are simply not the right place in the ecosystem to apply KYC regulations. But the most important issue is: national regulation in an international market poses a high risk for the competitiveness of local providers. If German staking infrastructure providers have to pay 19 percent VAT, they can simply not compete with providers from Malta or Liechtenstein, where tax regulations are very crypto friendly. 

Why is it important that regulators act on these topics fast?

It is still early days for the blockchain ecosystem. I think it is important that we get the basics right to enable growth and further development. If regulations are unclear or unsuitable it endangers the very basis of blockchain technologies. As long as there is uncertainty and doubt, market participants are slowed down. If the European Union wants to take leadership in the blockchain and crypto space, we need clarity and a regulation that supports growth and encourages the market to seek new opportunities.

What would happen, if the regulations are not being adapted and what would it mean in a European context?

If the regulators insist that staking infrastructure providers need a banking licence and pay VAT, it poses a clear competitive disadvantage and makes Germany unattractive as a business location. As much as all of the providers in the EBA working group like to stay in Germany – and pay taxes here – our business is rather location independent. The worst-case scenario would be, that many providers relocate. In a European context this would simply lead to a concentration of providers in countries with regulations that allow better competitiveness. It is important to understand that German or European validators or node operators ultimately provide control and security for decentralised networks in Europe. If no or only a few strictly regulated German/European validators secure those decentralised networks, we as Germans/Europeans have no control over these networks.

What would be the best solution in your opinion? 

To be clear, we are not against regulation and welcome strong governance. We just want to prevent regulations that could harm our customers instead of protecting them. In general I would opt for a sandbox framework, where – rather than applying existing laws – new regulations are developed in an iterative way to best fit the market and the technology. As for the voting issue, I see two options.

Option 1: Certain regulations should only apply to providers above a certain size to enable smaller players to participate and allow for a large, secure network. 

Option 2: Instead of a financial licence, we rather need a technical certification, e.g. something like the ISO standards. This could be a voluntary certificate which gives the certificate holder attractive advantages and could act as a quality assurance to customers. 

As for the VAT issue, we simply need a fair European, or even better, global solution that treats all countries the same. One way could be to apply the tax laws at the user’s end or develop new crypto-friendly tax laws. 

The post European Perspectives: What’s at stake for the staking industry? appeared first on European Blockchain Association.

One Umbrella Legal Entity for Multiple Assets and Multiple Tokens 

With the Liechtenstein Token Act everything, i.e. every right and asset can be tokenized. The question remains, however, how it is legally possible to tokenize everything. To answer this question, this article introduces and explains an advanced tokenization method: Legally compliant multi-asset equity tokenization enabled by a specific holding structure – called Protected Cell Company (PCC). Imagine multiple assets will be tokenized (i.e., multiple real estate objects, multiple machines, multiple IP rights) by one and the same legal entity. Plus, for each asset multiple tranches of tokens are issued (i.e., equity tokens, debt tokens, tokenized participation rights). This way, one real estate object could be represented by both equity tokens and debt tokens. As well as a tokenized machine could be represented by two tranches of debt tokens. The structure of a PCC allows a high degree of flexibility regarding what is to be tokenized. In addition, the Liechtenstein Token Act enables EU passporting, allowing customers simplified market access, which in turn significantly increases operational and regulatory efficiency. Thus shares tokenized in Liechtenstein are regarded both in Liechtenstein and in other countries as normal securities. These are excellent conditions for tokenizing, among other things, equity and representing it with equity tokens. These unprecedented developments, coupled with the new legal certainty provided by the Liechtenstein Token Act, pave the way for the emergence of a token economy.  

Tokenizing everything in Liechtenstein

In the blockchain and tokenization space, there are many voices claiming that everything should be tokenized. But this claim falls short. The process of tokenization is nothing less than the transfer of the “old” physical world, with all its goods and assets, into a “new”, digital world. In this process it is of utmost importance that existing law is complied with in order to ensure security and clarity for all parties involved. Hence, the question of how exactly tokenization can be practically implemented, now and in the future, must be addressed first. 

The basic structure of tokenization is that an asset or right is represented by a token and the token acts as carrier of this value or right. If shares or equity are tokenized, they are represented by equity tokens. Equally, when debt securities, debt capital or bonds are tokenized, they are represented by debt tokens.

The new Liechtenstein Token Act (TVTG) provides the underlying legal structure and consequently the necessary legal security. This disruptive legislation, which came into force in January 2020, aims to set standards throughout Europe. Liechtenstein is rightly described as a pioneer and forerunner of an emerging token economy. As a result of this well defined jurisdiction, it is now easier to establish trends that are emerging in the field of tokenization. One of these trends is certainly the tokenization of real estate. 

Most of the already existing tokenization projects work with debt tokens. The asset – say, a real estate object – is owned by a legal entity and this legal entity is issuing debt. The resulting debt tokens provide an interest payment to the investor based on a fixed interest rate. A flexible interest rate is also possible to accommodate a more beneficial performance. In most legislations, tokenizing debt is basically possible even though complex legal constructs are needed. However, tokenizing equity is more difficult and in most legislations it is still not possible. This circumstance has now changed thanks to the advanced jurisdiction in Liechtenstein. It is now possible to tokenize rights and values of all kinds witout complex workarounds or far-fetched interpretations of paragraphs.

Generally, tokenization is the process of deploying assets and rights on blockchain networks. Tokenization is attractive for investors as it makes investments much more convenient and at the same time allows for much better diversification than before. With tokenization any kind of real assets (e.g., real estate, art, patents, certificates, coupons, cars) can be made investable. Ownership can be fractionalized and fungibility of assets is increased. As a result, efficiency is increased, while at the same time the confidence of the individual actors in the process is strengthened and the costs of those processes are reduced. The issuer on the other hand can “package” all kinds of assets in tokens and offer them to investors. Even individual machines can be tokenized. This would allow investors to invest in single machines. For the machine manufacturer this would be sales financing enabled by the capital market. Each machine can become a single “profit center”. Machines can be financed by investors; made available to customers and – via revenues incurred from the customer – bring return to the investors. As such, the machine as a “profit center” would – like a small company – issue debt tokens and equity tokens. An investor in debt tokens would receive an interest payment for his initial investment while an investor in equity tokens would benefit from the remaining return.

The TVTG provides the necessary legal framework for tokenization processes for the further development of the token economy. Costs and time expenditure are significantly reduced. This is considered a strong driver for the expected mainstream adoption of tokenization in general. 

One of the core elements of the new framework is the so called Token Container Model (see Figure 1). In this model a token serves as a container with the ability to contain rights of all kinds. So it is possible to “load” this container with a right that represents a real asset like shares, gold and real estate.

With Liechtenstein being a member of the EEA (European Economic Area), it seems likely that the TVTG will make a decisive contribution to the standardization of tokenization processes in Europe. The regulation recently presented by the European Commission for the regulation of crypto-assets (“Markets in Crypto-Assets” or MiCA in short) deals with a standardized regulation for handling digital currencies and crypto-assets.

An equally important aspect is the issue of custody. If the necessary conditions are met, the holders of the tokens (i.e. the shareholders) are free to choose their preferred custody provider.

Figure 1: The Token Container Model explained

The unique legal framework provided by the TVTG clearly regulates ownership. The owners have the power of disposal over the assets and rights represented by tokens at all times. The tokenization itself follows an ordered life cycle, as do the resulting tokens. This gives software providers like Amazing Blocks the opportunity to offer a wide range of services and products. The cycle in general consists of the following elements: Generating the token, issuing (normally through ETO, STO, IEO or ICO), managing and trading against other tokens, and placing the tokens in an investment portfolio for diversifying purposes from the investor’s perspective. 

Protected Cell Company and tokenization in Liechtenstein

Protected Cell Companies enable targeted risk management, as the assets of the individual segments are clearly separated from each other and from the core. PCCs or Segmented Corporate Body (SV) is not a legal form directly, but rather an organizational form that allows corporate bodies to be divided into different segments. The field of activity of the individual segments must be legally permissible and fit the purpose of the legal entity. Due to their perfect fit for structuring financial assets, they are primarily found in investment management. The key of this structure is that each asset can be operated separately in terms of liability and capital although they are all managed by one “umbrella” legal company.

Now when it comes to tokenizing equity, the Liechtenstein Token Act has to be leveraged. Of course, a Liechtenstein-based legal entity is needed for this. For this, a company limited by shares (Aktiengesellschaft) can be used – organized as a PCC. The respective AG’s shares can also be tokenized subsequently. Relying on a tokenization software, the first projects are already doing this which you can read here. These tokenized shares allow an easier administration of the legal entity itself, for example, when it comes to ownership changes or onboarding new investors.

Tokenizing an asset with debt and equity tokens

Imagine you place an asset in a legal entity, for example, a real estate object. As described above, this asset can be tokenized by debt tokens which are separated from the tokenized shares of the legal entity itself. Technically speaking, there are two smart contracts at work. One smart contract for the tokenized shares of the company and another one for the debt tokens of the real estate object. A tokenization software provider then allows multi-asset administration. 

Another example already mentioned at the beginning is the tokenization of a machine. In this case, equity tokens are a good choice. Here, too, the ownership is transferred to the legal entity and then tokenized. The owner of the token is now the owner of a part of the machine (see figure 2).

Figure 2: Debt and equity tokens of one legal entity

Tokenizing multiple assets with multiple tokens per asset

Of course, it would also be possible that we transfer the ownership of multiple assets to the legal entity. Even more so, each asset could be represented by multiple types of tokens. For the machine, equity tokens could be issued. For the real estate object, debt tokens could be issued. 

Another very interesting model is if several tranches of tokens are issued for one and the same good. For example, it might make sense for the real estate object to issue both debt tokens and equity tokens. The investors of the debt tokens receive an interest payment for their investment; either a fixed interest rate or a flexible interest rate. Vice versa, the investors in the equity tokens own the asset and hold the equity value. Their reward is – simply speaking – the profit whereas the interest payments have previously been deducted. This innovative multi-asset multi-token emission is illustrated in the following figure 3. 

Figure 3: Multi-asset-tokenization

The full picture: multi-asset-multi-token issuance processes

Figure 4 shows the transfer of further assets to the legal entity, which are provided with several tranches of tokens. This process is called the multi-asset-multi-token issuance process. This configuration is a project to be realized in the future. However, it can be assumed that it is only a matter of time before an issuer adopts and applies this lean and flexible solution for asset tokenization. 

Figure 4: Multi-asset-multi-token issuance processes

The architecture behind the multi-asset-multi-token issuance process

In order to actually be able to cope with this complex model, an advanced tokenization software is needed. On the one hand, this would require an investor suite which will allow investors to onboard themselves and to comply with all required KYC procedures. Once verified, an investor suite integrates multiple assets, allows investments in multiple tokens and of course also provides a dashboard for investors that seek to build a portfolio.

On the other hand, there is an issuer software for the management board. This software allows administering all functions of a smart contract. Tokens generated for an asset stem from a smart contract. If a real estate object or any other asset would be represented by equity tokens and debt tokens, two smart contracts would be in place. Their configurations, the number of tokens outstanding, and token transferral restrictions etc. can be configured with the issuer software. Therefore, it can be used to configure multiple smart contracts to issue multiple tranches of tokens. These tokens such as equity tokens, debt tokens or tokenized participation rights – are plugged in the investor suite, so that investors can invest in them. This is illustrated as follows:

Figure 5: Issuer and investor software establishing a token economy

Conclusion

Liechtenstein has acknowledged that the physical world will sooner rather than later be complemented by a digital world. In a few years, thousands of rights and assets will be represented by tokens. The Liechtenstein Token Act took this inevitable development into account and created the conditions for further development anchored in a proper legal framework. Liechtenstein has secured for itself an exceptional position in the emergence of a token economy. 

New asset classes will continue to be discovered and introduced to tokenization. In the process, further new questions regarding jurisdiction will certainly arise. However, the Liechtenstein Token Act has already passed its first practical test and has proven that the framework operates successfully when applied. For the first time, the equity shares of an AG have been successfully tokenized.

A central question that remains is to how equity tokens, debt tokens or tokenized participation rights are recognized and treated in other countries. As a member of the European Economic Association (EEA), compliance with the codified EU/EEA regulations is mandatory. These basic regulations create the foundation on which the Token Act is built. 

At this stage it appears that qualified lawyers should be able to find a solution to allow investors from several countries to invest in those tokens generated by or within a Liechtenstein legal entity.

In conclusion, Liechtenstein is already an interesting destination for all kinds of projects focusing on tokenization. The tokenization of rights and assets is now possible in a simple, time-saving, cost-effective way.

Author: Nicolas Weber is Head of Business Development at Amazing Blocks – a tokenization startup from Liechtenstein supporting the entire life cycle: Consulting through the establishment period and a software for issuance, administration and investors. He is your direct contact for any regards. You can contact him via email or connect with him on LinkedIn.

Amazing Blocks offers a tokenization solution that enables its clients to tokenize various assets according to the Liechtenstein Token Act (software-as-a-service). The software covers both the issuance of tokens and investing in tokens. It suits the needs for tokenizing all kinds of assets (e.g. machines, cash flow generating contracts, trademarks, real estate, cars). Imagine that some asset should be tokenized. For this asset various tokens would make sense: Equity tokens, debt tokens, participation rights as tokens, ownership tokens, or any mixture of these tokens. The software of Amazing Blocks helps issuers to handle multiple assets and to issue multiple tokens for these assets. This is possible by integrating blockchain technology with the law (that is, the Liechtenstein Token Act). At the core, there is the “digital legal entity in Liechtenstein” based on “tokenized shares” which allows a very efficient foundation, a very efficient operation of the company and, thus, an efficient and flexible possibility to tokenize assets. This should now make a wide variety of tokenization projects possible, because the costs for tokenization are significantly reduced.

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