SEC Crowns a New Crypto King: Liechtenstein Cryptoassets Exchange (LCX)

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As U.S. REGULATORS crack down on crypto startups, European virtual currencies THRIVE

Virtual currencies seem to drive regulators to fits. This month, Security Exchange Commissioner Hester M. Peirce issued a formal Statement of Dissent about the commission’s handling of what it claims was an unregistered securities offering by virtual currency startup LBRY. Peirce, a Yale Law School graduate with time spent at the Senate Committee on Banking, Housing, and Urban Affairs, argued that such regulatory crackdowns hurt markets. Earlier this year, Peirce called such enforcements enough to drive innovation “kaput.”

Peirce has a point. So far this year, the SEC has announced enforcement actions against crypto startups Kraken, CoinDeal, Gebo Group, Stoner Cats, Linus Financial, Impact Theory, Hex, DEBT Box, Celsius Network Limited, Binance, Coinme, Bittrex, Beaxy, Tron Foundation, BitTorrent Foundation, Rainberry, Green United, FTX Trading, BK Coin, NBA star Paul Pierce (?!?), Terraform Labs, Gex, and Gemini Global Capital. 

This excludes independent action taken by the New York State Attorney General, Letitia James. James took direct legal action for over $1.1 billion in crypto losses against Gemini Trust, Genesis Global Capital, and the Digital Currency Group. 

And while our government is punishing such new ideas, a well-structured – and entirely legal – framework for crypto currencies has emerged in Europe. Starting in mid-2022, The European Council for the European Union reached a provisional agreement with the European Parliament on sweeping regulations to build a functional crypto-assets market. Called the MiCA proposal, it appears to do everything the American regulators cannot. The MiCA (Markets in Crypto-Assets) provides a clear, legal and socially oriented trading structure for virtual currencies. Taxes are collected. Illegal funds are tracked. Clear lines are drawn between what is regulatable and what is not. 

The MiCA regulations, which were formally adopted in April and in May, make surprisingly easy reading. The law makes it absolutely clear that European nation states will have a first-mover advantage when it comes to crypto innovation. 

Meaning the stodgy small financially oriented countries, like Luxembourg, Switzerland, and Liechtenstein, will be anything but kaput when it comes to new ideas and virtual currencies. 

Crypto Safe Harbors

Before American investors grab a flight on Virgin Atlantic to Europes to establish their virtual currency portfolios, expectations must be tempered. Europe’s financial reflexes can seem odd and deeply dysfunctional to outsiders. The collapse of Credit Suisse shows just how deeply wrong Euro-clubiness and insider relationships can go. For all the charm of a Luxembourg or Liechtenstein, one is dealing with fiscal nation-states that captured outsized fees dating all the way back to the Roman Empire. So as attractive as Luxembourg-ish startups like Q Securities, BitStamp, and CreateTrust might seem, bridging the crypto gap across the oceans requires caution.  At the very least, a local attorney will be needed. There are many lawyers throughout the Continent. 

But there are also relatively transparent and risk-managed ideas in euro cryptos. For our money, the place to start is the itty-bitty crypto exchange: the Liechtenstein Cryptoassets Exchange or LCX. LCX is the classic thinly traded virtual currency exchange. It was started in 2019 by a wannabe Elon Musk named Monty Metzger. And LCX has all the usual exposure of the small exchange. Uncertain trading depth. Unclear values. Unknown participants. But here’s the thing: LCX is a fully compliant virtual currency exchange in the regulated Liechtenstein economy that has reasonable protections from theft. 

The values of an exchange that is this thinly traded usually equals the volume traded on that exchange. And volume in LCX, like other euro cryptos, will almost have to go up. American regulators have made it impossible for capital to go elsewhere.

That might just make LCX the pure crypto-value idea we’ve ever touched. Plus Liechtenstein has some great skiing!