Custody of securities and crypto assets
Project Description
The custody and management of assets plays a crucial role for investors and service providers: on the one hand, assets on the financial market (especially securities) are held almost exclusively via intermediaries. On the other hand, many financial services cannot be provided at all without the simultaneous safekeeping of assets. In order to protect investors and the market, strict regulatory requirements traditionally apply to the custody of financial instruments. In addition, private law ensures that investors have a secure legal position. With the growing importance of digital markets, crypto assets (DLT financial instruments and other crypto assets) are now increasingly being held in custody. Compared to traditional securities, they have various special features that need to be addressed by the law. The importance of effective regulations in this area is demonstrated, for example, by the crash of the FTX crypto exchange, in which customers lost access to crypto assets worth more than USD 8 billion.
The custody of traditional securities is subject to a complex regulatory environment consisting of European supervisory law and national private law. In the area of crypto assets, the legal framework for custody is now largely influenced by the 'Pilot Regime for Market Infrastructures based on DLT', the 'Markets in Crypto-Assets Regulation' and the 'Token and TT Service Provider Act'. The research project aims to analyse differences between the custody of traditional securities and crypto assets and examine selected legal issues relating to the protection of client assets.
The custody of traditional securities is subject to a complex regulatory environment consisting of European supervisory law and national private law. In the area of crypto assets, the legal framework for custody is now largely influenced by the 'Pilot Regime for Market Infrastructures based on DLT', the 'Markets in Crypto-Assets Regulation' and the 'Token and TT Service Provider Act'. The research project aims to analyse differences between the custody of traditional securities and crypto assets and examine selected legal issues relating to the protection of client assets.
Relevance to Liechtenstein
The Liechtenstein financial centre is of central economic and social importance to the country. Private wealth management is at the heart of its activities, with many of the assets under management requiring custody. On the one hand, Liechtenstein is unique in that it has no special legal framework for the custody of traditional securities. On the other hand, it is to be expected that the innovative orientation of the financial center and the government's targeted promotion of the "token economy" will lead to the increasing importance of the custody of crypto assets. The research project can help to clarify open questions and further increase legal certainty in the custody of different assets.
Scientific, Economic and Societal Impact
The custody of financial instruments is relevant in practice for the provision of a wide range of different financial services. In addition, it is to be expected that crypto assets will also play an increasingly important role with the advancing digitalisation. Scientific analysis of the custody of securities and crypto assets can promote legal clarity and legal certainty, thus offering an advantage to all participants in the Liechtenstein financial centre. Key findings will be incorporated into relevant academic publications and will thus be available to legal practitioners as well. Furthermore, certain aspects will be made accessible to the wider public during a presentation at a relevant seminar/webinar and can thus provide guidance for market participants.
