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It may be smaller than Brooklyn, but Liechtenstein is working on something pretty big.
With a population of 40,000 and only a single hospital, Liechtenstein is smaller than small, but a low tax rate over the years has made it a hub for financial services – part of the reason it’s now home to more registered businesses than citizens.
Now nestled between the Swiss Alps and Austria, Liechtenstein’s Crown Prince Alois has been sending signals to the cryptocurrency community that his family’s principality of Liechtenstein is the place to bring their businesses.
And it's working.
Enter Liechtenstein
In 2013 Yanislav Malahov was closely involved in the creation of Ethereum, the world’s second-largest cryptocurrency behind Bitcoin.
Today he’s building a new blockchain called Aeternity, which he believes will be more scalable and offer lower costs for smart contracts than anything that’s come before.
Where did he decide to base his new venture?
Malahov tells Forbes that Liechtenstein was the obvious choice.
A Royal invite
Malahov had a chance encounter with one of the Princes of Liechtenstein at a conference in 2016 who told him of the principality’s warmth to cryptocurrencies.
Fast-forward two years and, after meeting with local regulators and tax authorities, Malahov decided there was only one place to launch his new startup.
“They’re not putting any financial incentives in place, but they're making it really easy to incorporate a cryptocurrency business,” he says.
You can open a company without a bank account, just by using Bitcoin or Ethereum.
Malahov remembers founding Aeternity with the equivalent of 50,000 Swiss francs in Ethereum.
Plus Liechtenstein’s quaint valleys and fairytale castles are enough to attract any entrepreneur.
“It's a beautiful valley in the Alps, today is very cloudy, but usually it's beautiful," says Malahov.
But making it enticing for cryptocurrency and blockchain businesses to set up shop and trade appears to only one part of Liechtenstein’s plans.
Bitcoinstein
Liechtenstein is a member of the European Economic Area, but not the European Union.
The advantage being that financial services based there, including those working on cryptocurrencies and blockchain, can skirt some of the most onerous EU regulations while still trading across the continent because of financial ‘passporting’ rules.
It’s part of the reason why Liechtenstein’s banks are still handling crypto investments on behalf of their clients, and even offering advice on initial coin offerings, while the rest of Europe’s financial sector has shied away from digital currencies.
Crown Prince Alois last month even implied that his royal family could soon use blockchain to manage the day-to-day administration of their monarchy, and he’s made mention of diversifying his family’s assets into digital tokens.
Alois's overt support is already having an impact on the ground.
Monthly blockchain meetups in the capital of Vaduz now draw hundreds of attendees, from newly-founded crypto startups like Chainium and Vimana – not bad for a country of Liechtenstein’s size.
Malahov believes the future of blockchain businesses in Liechtenstein is bright, he’s even developing a co-working space which could be the principality’s first dedicated entirely to blockchain.
There’s still a way to go, talent is obviously a challenge in a country of this size, as is traditional venture funding.
