«Interest in the issue of tokenized securities is increasing»

12 February 2020

«Interest in the issue of tokenized securities is increasing»

Dorothea Rohlfing has headed the Regulatory Laboratory / Financial Innovation group in the management team of the Financial Market Authority (FMA) Liechtenstein since June 2018. The regulatory laboratory is the FMA’s internal team of experts for new financial technologies. The team’s tasks include exchanging information with start-ups and established financial service providers on topics relating to new financial technologies. At the interface between regulation and the market, the team is therefore the contact for established financial service providers and companies in the fintech sector. In the interview, Dorothea Rohlfing talks about the challenges in her everyday life and the effects of the TVTG.

The regulatory laboratory was founded in 2016. Why?

In 2015 and 2016, the FMA was confronted with the first requests for cryptocurrencies and blockchain. Since these often had points of contact with several supervisory areas, we met regularly for discussions. That was when the regulatory laboratory was born. As a result, inquiries increased more and more. The regulatory laboratory soon became part of Impuls Liechtenstein, the government’s innovation program.

In 2018, we then reorganized the regulatory laboratory and set it up as a separate organizational unit in the FMA. Since then, our tasks have become even more diverse. Through the TVTG, the so-called blockchain law, we are now responsible for registration and event-related supervision in the fintech sector.

However, we are still the point of contact for all fintech questions and we are involved in the dialogue in the Liechtenstein fintech scene.

According to the mission statement, the FMA ensures “the stability and credibility of the financial market, the protection of customers and the prevention and combating of abuses.” Are these goals increasingly difficult to meet thanks to ever new business models and technical solutions?

Financial technologies represent an opportunity for Liechtenstein. The FMA is pursuing the approach of using and structuring regulation in such a way that established financial service providers and new companies can implement their business models. However, the FMA as a supervisory authority not only deals with the opportunities, but also with the risks of technology-based business models. We have to ensure that customer protection is guaranteed, that trust in the financial market is maintained and that the stability of the financial system is not endangered. The TVTG creates a binding legal framework in an area that was not previously regulated. In addition, previous law applies – even if it is not always aimed at innovative business models – of course also for fintechs.

Let’s stay with the TVTG. Do you expect the law to do more work for you?

Yes, the TVTG transfers the registration and event-related supervision of ten service providers to the FMA who offer their services on VT systems. The FMA is also responsible for the due diligence supervision of six of these VT service providers. Of course, this will give us more to do. The TVTG has already kept us busy during the implementation phase. As of January 1, 2020, we issued several guidelines that specify, among other things, the requirements for registration. We have also published the corresponding application forms and further information for service providers in the fintech sector on our website.

The FMA usually deals with traditional financial intermediaries. Do you notice a difference between traditional bankers and the new generation of fintech entrepreneurs?

Fintech people often have a different background than traditional bankers. Fintech people tend to come from the technological side. This is also reflected in the dealings, which are often a little more relaxed. But that doesn’t mean that fintech bankers are less professional. Maybe that will also change over time – after all, as the newspapers read, bankers have recently also been allowed to wear sneakers.

How do you keep up with technical developments and understand the ever new business models?

The regulatory laboratory is intensively concerned with new technological developments. We are constantly training and are in close contact with the market. It is also important that we pass on our knowledge within the FMA. Ultimately, for example, a bank supervisor must also be aware of new developments – digital change affects us all. We therefore organize training courses and also train employees who work in other areas.

So far there is no wide range of training courses available for blockchain-specific expertise. Do you notice this when recruiting new employees?

So far there is actually no wide range of training. However, this does not mean that we cannot find any employees with the necessary specialist knowledge. These people have often not acquired their knowledge in a formalized course. In addition, the offer – also in formalized courses – is constantly growing. For example, the University of Liechtenstein regularly offers the Blockchain and FinTech certificate course, which FMA employees have already attended. In addition, supervision not only requires blockchain-specific expertise, but also knowledge of financial market and administrative law, for example.

“Time to market” is a big topic. How long does it take on average from the first contact with you to the granting of a license? And what does the process look like?

A basic distinction must be made between business models that require registration under the TVTG and those that fall under the well-known financial market legislation, where, for example, a license as a bank or payment service provider must be obtained. Each law provides for different deadlines within which the FMA must process an application. Such a period for registration according to TVTG is three months. It starts running when the application is complete. The time it takes for the FMA to approve or register also depends to a large extent on the quality of the submitted application.

What is the success rate of inquiries?

That depends on what is meant by an inquiry and its success. We often have discussions with companies at an early stage, who may seek special legal approval. Sometimes with the result that no license is required at all, but only registration according to TVTG. Or, in the course of the discussions, the interested parties decide to adapt their business model or to align it differently. We cannot therefore show a quota. However, if an authorization is actually applied for, the applicant has usually considered it carefully, invested a lot of time and clarified the requirements beforehand.

The regulatory laboratory started in 2016 and processed 17 inquiries in the first year. In 2017 it was 98 and in 2018 it was 255. Can you already say something for 2019?

In 2019, the FMA received 181 requests relating to blockchain or cryptocurrencies.

Which business models form the largest part of the inquiries?

It is difficult to say and is constantly changing. Last year, however, we saw that inquiries in the area of ​​ICOs, i.e. the initial coin offerings, decreased significantly compared to the previous year. The market participants showed more interest in trading venues for cryptocurrencies as well as in exchange services and the issuance of tokenized securities.

Matthias Willi conducted the interview for Bank Frick.


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