Liechtenstein’s Blockchain Act vs. Malta’s DLT Framework: Microstate Crypto Regulation for German Entrepreneurs

Overview of Blockchain Laws: Why Small States Lead the Way

Let me start with an inconvenient truth:

Big countries are slow. Small states are nimble.

While hundreds of officials in Germany debate the perfect crypto regulation, Liechtenstein and Malta have already acted. The result: two of the most advanced blockchain laws in the world.

The Motivation Behind Small States

Why do countries with less than a million inhabitants invest millions in blockchain regulation?

The answer is simple: Economic survival instinct.

Liechtenstein’s economy relies on its financial center. Malta wants to position itself as Blockchain Island. Both countries realized early on: those with the best rules attract the best businesses.

This led to two completely different approaches:

• Liechtenstein: Principles-based, technology-neutral, focused on tokens
• Malta: Rules-based, specific, geared toward DLT services

What Sets These Laws Apart?

Both regulations have a crucial advantage over Germany: legal certainty.

Instead of vague guidelines, there are clear definitions. Instead of years of uncertainty, entrepreneurs know right away what is permitted.

But heres where it gets interesting:

The two systems are as different as night and day. Liechtenstein prioritizes flexibility, Malta focuses on detailed regulations.

For German entrepreneurs, this means: you must understand which approach suits your business model.

Let’s take a closer look at each system.

Liechtenstein Blockchain Act: The TVTG as the Gold Standard

The Token and TT Service Provider Act – or TVTG for short – is Liechtenstein’s answer to the blockchain revolution. In force since January 2020, it is seen by many as the world’s most modern blockchain law.

But what makes it so special?

The Principles-Based Approach

This is where the brilliance of the TVTG lies:

Instead of regulating each technology individually, Liechtenstein defines overarching principles. This means the law applies even to technologies that don’t exist yet.

Imagine a law that only regulates cars. What happens when electric or self-driving cars arrive?

The TVTG, instead, regulates mobility – and thereby automatically captures all future developments.

Focus on the Token Economy

The core of the TVTG is tokens – digital units on a decentralized system. This definition is purposefully broad:

• Cryptocurrencies like Bitcoin
• Utility tokens for platforms
• Security tokens for investments
• Stablecoins for payments
• NFTs for digital art

All these tokens fall under the TVTG – with specific rules based on their function.

The TT Service Provider License

If you want to operate a blockchain business in Liechtenstein, you typically need a TT Service Provider license. TT stands for Trusted Technology.

There are ten different TT services:

Advantages for German Entrepreneurs

Why should you, as a German entrepreneur, consider the TVTG?

First: EEA Passport. Liechtenstein is part of the European Economic Area. That means a license from Liechtenstein entitles you to do business throughout the EU.

Second: Low taxes. Corporate tax is just 12.5%. Even lower rates for holding companies.

Third: Legal certainty. The TVTG is detailed and well-tested in practice.

Practical Example: Token Issuance

Suppose you want to issue tokens for your platform. In Germany? Legally uncertain. In Liechtenstein? Clear rules:

1. Apply for a TT Service Provider license
2. Prepare a token whitepaper
3. Conduct due diligence
4. Issue and trade the token

The entire process is defined by law and takes around 6–12 months.

But beware: The TVTG is not suitable for everyone. So let’s look at the alternative.

Malta DLT Framework: The EU Pioneer in Crypto Regulation

Malta took a different path. Rather than regulating everything in a single law, the island nation developed an entire framework – three laws that form Blockchain Island.

Let me show you why Malta is so popular among German entrepreneurs.

The Three-Pillar System

Maltas DLT regulation stands on three laws:

• MDIA (Malta Digital Innovation Authority Act): The regulatory authority
• ITAS (Innovative Technology Arrangements and Services Act): Technology certification
• VFAA (Virtual Financial Assets Act): Financial services

This structure sounds complicated. It is. But there’s a benefit: extreme precision.

VFA License: The Key to Success

For most German entrepreneurs, the core element is the VFA license. VFA stands for Virtual Financial Assets.

What counts as a VFA? Practically all tokens that are not:

• E-money (like stablecoins)
• Financial instruments (like security tokens)
• Pure utility tokens

That means most cryptocurrencies and platform tokens fall under the VFA Act.

The Four Types of VFA Licenses in Detail

Malta distinguishes between four types of VFA services:

The Malta Advantage: EU Passport

This is where Malta gets really interesting for German entrepreneurs:

As an EU member, Malta automatically offers an EU passport. That means you can do business in all 27 EU countries with a Maltese license.

This passport is invaluable. Imagine running a crypto exchange. With a Malta license, you can legally and compliantly access 450 million EU citizens.

Tax Considerations

Malta doesn’t just attract with regulation, but also with taxes. The Maltese tax system is based on the non-dom residency principle:

• Corporate tax: 35% (but with rebates, often only 5% effective)
• No taxation of foreign-sourced income for non-doms
• Special rules for crypto gains

Also: Malta has a double tax treaty with Germany. No nasty surprises there.

Practical Example: Crypto Exchange

You want to run a crypto exchange? In Malta, the process is as follows:

1. Apply for a Class 2 VFA license
2. Deposit €125,000 minimum capital
3. Appoint a compliance officer
4. Implement AML processes
5. Pass MFSA inspection

Timeframe: 12–18 months. Costs: €200,000–€300,000 (including legal and consulting).

That’s not cheap. But in return, you get something priceless in Germany: legal certainty.

Malta’s Downsides

Let’s be honest: Malta isn’t perfect.

The bureaucracy is slow-moving. The authorities are overloaded. And Malta has faced increased EU scrutiny since the Paradise Papers.

Still, for many German entrepreneurs, Malta remains the best option for EU-wide crypto business.

But which system really suits you? Let’s directly compare.

Direct Comparison: Liechtenstein vs Malta for German Entrepreneurs

This is where things get specific. You’ve seen both systems. But which is right for your business?

The answer depends on three factors: your business model, your target markets, and your risk tolerance.

Business Model Analysis

Different ventures require different regulations. Here are my recommendations from practice:

Regulatory Depth

This is where both systems fundamentally differ:

Liechtenstein relies on principles. The TVTG provides a framework but plenty of room for interpretation. Advantage: flexibility. Disadvantage: sometimes uncertainty with new business models.

Malta regulates in detail. Each service has specific rules. Advantage: precision. Disadvantage: little scope for innovation.

My recommendation: If you have a well-established business model, choose Malta. If you’re innovative, pick Liechtenstein.

Timing and Approval Process

Time is money – especially in the fast-moving crypto world:

• Liechtenstein: 6–12 months for TT license
• Malta: 12–18 months for VFA license

Why is Liechtenstein faster? Smaller authority, fewer applications, proven processes.

Malta, meanwhile, faces an influx of applications. The MFSA (Malta Financial Services Authority) is chronically overloaded.

Detailed Cost Comparison

Let’s talk money. Here’s the real cost of a license:

Conclusion: Liechtenstein is cheaper to set up and maintain. Malta is pricier but offers the EU passport.

Reputation Factor

An often-overlooked aspect: how do partners and investors perceive your license?

Liechtenstein enjoys an excellent reputation as a financial center. The TVTG is considered the gold standard in blockchain regulation. Saying, “We’re licensed in Liechtenstein,” opens doors.

Malta struggles with image problems: Paradise Papers, EU criticism, money laundering allegations. Fair or not – it impacts reputation.

That’s relevant for B2B business. For end customers, not so much.

Market Reach

This is where Malta comes out ahead:

• Malta: EU passport for 450 million people
• Liechtenstein: EEA passport for 500 million people (EU + Norway, Iceland)

Both enable Europe-wide business. The difference: Malta is an EU member, Liechtenstein is not. This can be relevant for specific EU regulations.

Overall Tax Considerations

Taxes are complex. Here are the key points:

Liechtenstein:

• 12.5% corporate tax (standard)
• 2.5% for holding companies
• No DTT with Germany (but EU guidelines apply)
• Very low administrative costs

Malta:

• 35% corporate tax (but possible refunds)
• 5% effective rate with smart structuring
• DTT with Germany
• Higher compliance costs

Important: Both structures must comply with German CFC (controlled foreign corporation) rules (AO 14).

My advice: Have a specialized tax advisor review your case. The pitfalls are many.

Practical Implementation: Which System Fits Your Business Model?

Theory is great. But how do you make a concrete decision?

I’ll guide you through my proven decision matrix. I’ve used this method for years with clients – and it works.

The 5-Point Check

Before you choose a location, answer these five questions honestly:

1. Where is your main market? (Germany, EU, global)
2. What is your projected turnover? (under €1m, €1–10m, over €10m)
3. How innovative is your business model? (established, moderately new, entirely new)
4. What is your risk appetite? (low, medium, high)
5. What is your setup budget? (under €200k, €200–500k, over €500k)

Decision Matrix in Practice

Your answers will usually give a clear picture:

Case Study: German ICO Provider

Let me demonstrate how a real-life decision process works:

Situation: A German software developer wants to issue tokens for his gaming platform. Planned raise: €5 million. Target audience: European gamers.

Analysis:

• Main market: EU (Malta point)
• Turnover: €5m (mid-range)
• Innovation: Gaming tokens are established
• Risk: Medium (wants to launch quickly)
• Budget: €300,000 for setup

Decision: Liechtenstein

Why? The TVTG is optimized for token issuance. The EEA passport covers EU business. Lower costs and quicker implementation for an established model.

Result: Token launch after 8 months, total costs €180,000, successful raise of €4.2 million.

Case Study: Crypto Exchange for Institutional Clients

Situation: A fintech team wants to build a B2B crypto exchange for banks and asset managers, planning expansion into 15 EU countries.

Analysis:

• Main market: EU-wide (Malta point)
• Turnover: €10m+ planned
• Innovation: B2B focus is new
• Risk: Low (institutional clients)
• Budget: €800,000 available

Decision: Malta

Why? Institutional clients expect EU regulation. VFA Class 2 is tried and tested for exchanges. Budget sufficient for Malta setup.

Result: License after 14 months, first bank clients after 18 months, break-even after 2 years.

Common Pitfalls When Choosing a Location

From my advisory practice, these are the most common mistakes I see:

1. Focusing only on taxes: Low tax is useless if the business model doesn’t work
2. Underestimating regulation: Compliance costs time and money – before and after the license
3. Forgetting German substance: Too little substance in Germany triggers CFC issues
4. Ignoring timing: In crypto, a years delay can be fatal

My Practical Recommendations

After ten years in international tax consulting, here are my main tips:

1. Start with a substance check: How much substance do you truly need in your target country?
2. Plan for German CFC rules: §14 AO can kill poorly structured setups
3. Build proper compliance from day one: Fixing it later costs ten times as much
4. Choose experienced attorneys: Only a few firms are truly competent in either country
5. Factor in follow-up costs: The license is only the beginning – compliance is ongoing

But what does such a structure really cost? Lets look at the actual figures.

Costs and Effort: What You Really Need to Invest

Let me be frank: Both structures are not cheap.

But they’re less expensive than most entrepreneurs think. The problem: many lawyers and consultants exaggerate cost estimates – out of caution or ignorance.

Here are the honest numbers from my own practice.

Liechtenstein: Full Cost Breakdown

Here’s what a TT Service Provider license really costs:

One-Time Setup Costs

Annual Operating Costs

• Compliance Officer: €60,000–€80,000 (can be external)
• Auditor: €15,000–€25,000
• Tax Advisor: €8,000–€12,000
• FMA Fees: €5,000–€10,000
• Office/Infrastructure: €20,000–€30,000
• Total/Year: €108,000–€157,000

Malta: The VFA License Cost Catalog

Malta is pricier – but costs are more transparent:

One-Time Setup Costs

Annual Operating Costs

• Compliance Officer: €80,000–€120,000 (Malta-resident)
• Money Laundering Reporting Officer: €60,000–€80,000
• VFA Agent Fee: €20,000–€30,000
• MFSA Supervisory Fee: €15,000–€25,000
• Audit/Tax: €25,000–€40,000
• Office/Staff: €50,000–€80,000
• Total/Year: €250,000–€375,000

Hidden Costs Often Forgotten

Both structures have cost traps that are often glossed over in consultations:

German CFC Taxation

If you set up the structure incorrectly, §14 AO applies. That means: German taxation despite a foreign company.

To avoid this, you need:

• Real business activity on site
• Local employees with decision-making power
• Substantial office space
• Proof of independent management

Additional costs: €50,000–€100,000 annually

Currency Risk and Banking

Often underestimated: banking costs in both countries.

Liechtenstein: Banks usually require €50,000–€100,000 minimum deposits for crypto businesses.

Malta: Similar, plus difficult account opening due to reputation issues.

Technology Compliance

Both countries have strict IT security requirements:

• Penetration tests: €10,000–€20,000 annually
• Security audits: €15,000–€30,000
• Compliance software: €20,000–€50,000

ROI Calculation: When Does It Pay Off?

The crucial question: from what turnover does the effort make sense?

My rule of thumb from practice:

Financing Licensing Costs

A practical tip: Many entrepreneurs underestimate the cash flow required.

You’ll need to prefinance capital 12–18 months before the first revenue. That means:

• Setup costs: €250,000–€400,000
• Operating costs for 18 months: €150,000–€500,000
• Cushion for delays: €100,000–€200,000

Total needed: €500,000–€1,100,000

Thats a lot of money. But for successful crypto businesses, it pays off quickly.

But the risks matter even more. Let’s see what German authorities scrutinize most.

Risks and Pitfalls: What German Authorities View Critically

This is where things get serious. Because a foreign license is only half the battle.

The German tax office and BaFin take a close look when German entrepreneurs run blockchain businesses abroad. And they have powerful tools.

Let me show you the reality.

The BaFins Core Question

The first critical question usually comes from BaFin: “Are you conducting business in Germany?”

This gets complicated. Because business in Germany can mean many things:

• Advertising to German customers
• German website (.de domain)
• German bank accounts
• Management from Germany

The problem: BaFin interprets this very broadly. A German founder managing his Maltese exchange from Munich? For BaFin, a clear case of unlicensed business activity in Germany.

The Management Location Pitfall

This is where most mistakes happen:

Many German entrepreneurs form a company in Liechtenstein or Malta – and manage it from Germany. This is legally problematic and tax-wise risky.

Rule of thumb: Where the main decisions are made, that’s where the legal seat of the business is.

Practical Example: The Munich ICO Case

A German entrepreneur set up a company in Liechtenstein for his token launch. Fully licensed, all laws followed.

But: He managed the company from his Munich office. All key decisions were made in Germany.

Outcome: The tax office classified the company as German. Full German taxation despite the Liechtenstein structure.

Cost: €800,000 in back taxes plus interest.

CFC Taxation Under §14 AO

This is the sharpest weapon at the disposal of the German tax office:

If your foreign company is considered an “intermediate company”, the profits are still taxed in Germany. The foreign structure is ignored for tax purposes.

When Does §14 AO Apply?

CFC rules apply if:

1. You hold more than 50% of the foreign company
2. The company earns passive income (often applies for token businesses)
3. The foreign tax rate is below 25%
4. No real economic activity takes place locally

Especially tricky: Point 4 is subjective. What counts as real economic activity?

Safe Harbor Rules

There are exceptions to §14 AO:

• EU companies: If real economic activity is demonstrated
• Active business activities: If the company is truly operational
• Shareholding income: For holding structures with investments

This is easier for Malta (EU) than for Liechtenstein (non-EU).

AML Compliance: The Underestimated Killer

Anti-money laundering compliance is extremely strict in both countries. And German authorities carefully check whether you are playing by the rules.

Common AML Pitfalls

1. Incomplete KYC processes: A German customer without proper identification can cost you your license
2. Missing transaction monitoring: Suspicious transactions must be reported – even if they involve German customers
3. Documentation flaws: Every AML decision must be documented and justified

Consequences of violations:

• Fines up to €500,000
• Loss of license
• Criminal prosecution in Germany

GDPR Issues

An often-overlooked risk: data protection.

If you have German or EU clients, GDPR applies in full. This means:

• Appoint an EU data protection officer
• Data protection impact assessment for blockchain data
• Right to erasure (challenging on blockchain)
• Data transfers to third countries are problematic

GDPR fines can reach up to 4% of annual revenue. For €10 million, that’s €400,000.

Tax Transparency Requirements

Germany continually tightens disclosure rules for foreign structures:

Notification Obligation under §138a AO

You must notify the tax office of:

• Formation of foreign companies
• Start of foreign business activities
• Substantial changes to the structure
• Profit distributions

Deadline: Within one month. Failure can cost €5,000–€25,000 in fines.

Country-by-Country Reporting

From €750 million in group turnover, you must disclose:

• Sales per country
• Profits per country
• Employees per country
• Business activities per country

This makes aggressive tax structures transparent – and vulnerable.

Building Wealth Abroad

A personal risk for you as a founder:

If you hold shares in foreign crypto companies, you must tax them:

• Capital gains: On sale, §17 EStG (25% for >1% stake)
• Deemed distribution: On CFC inclusion (§14 AO)
• Inheritance tax: Foreign holdings must be reported

How to Minimize the Risks

Despite all the risks: with the right structure, it works. Here’s my checklist:

1. Establish real substance: Not just a mailbox, but actual operations
2. Local management: Decisions must be made locally
3. Minimize German activities: No customer service, no marketing from Germany
4. Be transparent with German authorities: Fulfill all reporting requirements
5. Professional compliance: No compromises on AML/GDPR
6. Tax advice: Get specialized advice both in Germany and locally

It costs money. But it’s cheaper than a nasty surprise in a tax audit.

Finally, let’s talk about the future: Where is regulation heading?

Future Outlook: How Crypto Regulation Is Evolving

The blockchain world is changing rapidly. Regulation is racing to keep up.

What does this mean for your decision between Liechtenstein and Malta? And what new developments should you keep an eye on?

Here’s my assessment of the key trends.

MiCA: The EU Revolution Is Coming

The Markets in Crypto-Assets Regulation will change everything. From 2025, MiCA will apply EU-wide – and thus also in Malta.

What does this mean in practice?

Uniform EU Standards

MiCA introduces, for the first time, uniform crypto rules for all 27 EU countries. That means:

• One license valid EU-wide (a true single market)
• Harmonized capital requirements
• Consistent AML standards
• Same customer protection

This is an advantage for Malta: existing VFA licenses will become MiCA-compliant.

For Liechtenstein it’s more complex: as a non-EU country, it must adapt its laws to maintain EU access.

New License Categories Under MiCA

MiCA introduces new service categories:

Liechtenstein’s Answer to MiCA

Liechtenstein is not sitting idly by. The principality is already planning TVTG 2.0 – an updated version for the MiCA era.

Planned changes include:

• EU equivalence: TVTG licenses to become MiCA-equivalent
• New token categories: Alignment with MiCA definitions
• Enhanced passport: Improved EU access despite non-EU status
• DeFi rules: Specific regulation for decentralized services

Germany Is Catching Up

Germany, too, is moving. The planned Financial Markets Digitalization Act” brings important innovations:

Crypto Custody Becomes Standard

BaFin now recognizes crypto custody as a banking service. This means:

• German banks can hold crypto
• Full banking license possible for crypto custody
• Deposit insurance for crypto assets

This will offer a real alternative to foreign structures for German entrepreneurs.

Programmable Money (Digital Euro)

The ECB is piloting the digital euro. If it launches, everything changes:

• National cryptocurrency as standard
• New compliance requirements
• Different competitive landscape for private stablecoins

New Technologies, New Challenges

The next regulatory wave is coming from new technologies:

DeFi Protocols

Decentralized finance protocols are still largely unregulated. That will change:

• Liechtenstein: TVTG already covers many DeFi applications
• Malta: More difficult, as the VFA framework focuses on centralized services
• EU/MiCA: No clear DeFi rules yet

This could give Liechtenstein a continued advantage.

NFTs and the Metaverse

Non-fungible tokens and virtual reality raise new legal questions:

• Are NFTs financial instruments or art?
• Which laws apply in virtual worlds?
• How is virtual real estate taxed?

Both countries are working on NFT-specific regulations.

Geopolitical Shifts

The US is tightening crypto regulation. This could benefit Europe:

US Crypto Firms Leaving

Many US crypto companies are seeking EU alternatives. Beneficiaries:

• Malta for established exchanges
• Liechtenstein for innovative DeFi projects
• Germany for institutional services

Digital Yuan and CBDCs

China’s digital yuan and other Central Bank Digital Currencies (CBDCs) will transform the market. Europe must keep pace.

My Five-Year Outlook

Based on current trends, I expect:

1. 2024–2025: MiCA launches, Malta benefits from first-mover advantage
2. 2025–2026: Liechtenstein adapts TVTG, maintains innovation lead
3. 2026–2027: Germany becomes competitive, some businesses return
4. 2027–2029: Consolidation, only the best locations survive

Winners and Losers

Likely winners:

• Malta: Benefits from MiCA compatibility
• Germany: Regulatory catch-up
• Switzerland: Remains attractive as a non-EU alternative

Possible losers:

• Smaller crypto hubs without real innovation
• Liechtenstein: Only safe with successful TVTG update
• Pure tax havens: Compliance will outweigh low taxes

Strategic Recommendations

What does this mean for your decision?

1. Short term (2024–2025): Malta for immediate EU business, Liechtenstein for innovation
2. Medium term (2025–2027): Build flexible structures adaptable to changes
3. Long term (2027+): Keep Germany as an option in mind

The most important thing: stay flexible. Crypto regulation is a moving target.

A well-structured foreign company today can relocate or return to Germany tomorrow – if the conditions are right.

Frequently Asked Questions on Liechtenstein vs Malta Blockchain Regulation