Prime Minister and Minister of Finance of Liechtenstein Daniel Risch recently announced plans to enable citizens of the microstate to pay for specific government services using Bitcoin.
In an interview with the German business daily Handelsblatt, he explained that the plan is to accept Bitcoin deposits and immediately convert them into Swiss francs, the nation’s official currency. Currently, there is no specific timeline for the plan available yet.
Although the nation is not an EU member, it is still part of the European Economic Area, making it subject to the EU’s Markets in Crypto-Assets (MiCA) regulation. It could attract more crypto companies to the area due to its regulatory clarity.
Apart from the announcement, Risch also said that Liechtenstein is open to cryptocurrency investments. According to a report, the principality could invest part of its reserve funds, which currently stand at 2.23 billion Swiss francs ($2.51 billion), in the world’s largest cryptocurrency. The state also invests three times its 900 million-franc ($1 billion) annual budget in capital markets.
A leading European crypto hub
In 2019, the country passed the Liechtenstein Blockchain Act, making it one of the first countries in the world to have specific cryptocurrency regulations. The law acknowledges the distinct characteristics of blockchain technology and offers guidance on the classification and regulation of assets based on blockchain.
The move attracted many crypto businesses to set up in the country, including the Liechtenstein Cryptoassets Exchange (LCX), which also operates in Zug’s Crypto Valley.
The LCX is an innovative crypto company that offers various services such as trading, storage and asset management. It also has developed its blockchain infrastructure for secure and transparent transactions.
Its commitment to exploring the crypto technology is visible through partnerships with several Swiss firms such as Sygnum, a prominent crypto bank, and Metaco, a digital infrastructure provider that enables exchanges to offer crypto custody services.
The nation-state has also become one of the few European financial centers to provide crypto banking and investment services to cater to the expanding market.
Cryptocurrency for public service
The adoption of Bitcoin payments for taxes and public services is not new. For example, the Swiss municipalities of Zug and Lugano have allowed individuals to pay certain taxes and public service expenses using Bitcoin.
The use of cryptocurrencies in government services is still in its infancy, and numerous countries are still doubtful about their use in the public sector.
The primary worry governments have regarding cryptocurrencies is their instability. Cryptocurrencies are notorious for their extreme price volatility, which makes it challenging to control and anticipate their worth.
However, governments’ perceptions of cryptocurrencies are changing due to their recent surge in popularity. Accepting Bitcoin payments for public services is not only about adopting new technologies but also about meeting the needs and demands of citizens, especially the younger generation.
Cryptocurrencies can offer several advantages for government services, such as instant transactions without intermediaries, which can make the payment system more efficient, and greater transparency due to decentralization.
By accepting Bitcoin payments for government services, Liechtenstein plans to enhance its status as a crypto-friendly nation and build on its legacy banking sector.