Liechtenstein is following in the footsteps of El Salvador, which made Bitcoin a legal tender two years ago. The German-speaking microstate, landlocked between Austria and Switzerland, is planning to accept the leading cryptocurrency as a means of payment for government services. “A payment option with Bitcoin is coming,” prime minister Daniel Risch said in an interview with a German newspaper “Handelsblatt” on Sunday.
The information is scarce and the plan is vague, with no specific time frame announced so far. The initial proposal suggests the cryptocurrency should be swapped for Swiss francs immediately after the money is received in order to avoid the exchange-rate risk. The interview gave no indication of Bitcoin having any chance to become a currency on par with the Swiss franc or gain a special status other than an accepted means of payment.
However, Risch, also a finance minister, hinted at the possibility of investing the state’s financial reserves in crypto assets in the future. Liechtenstein is one of but a few debt-free countries worldwide. Each year, the microstate saves around $3 billion, triple its annual budget, and invests the money mainly in securities.
Accepting Bitcoin as a means of payment for government services could facilitate tax and fee payments for tech-savvy citizens. Cryptocurrency transactions are fast and secure and don’t require intermediaries, such as banks or payment processors. The latter factor could also help reduce the related costs, such as bank fees and charges, generating savings for both government and citizens.
Challenges with promoting Bitcoin payments include market volatility, low adoption rate, fraud and money laundering concerns. Bringing the plan to fruition would require running widespread educational campaigns and implementing robust anti-fraud measures – which, by the way, seems perfectly doable.