LUXEMBOURG Law and Practice Contributed by: Andreas Heinzmann, Valerio Scollo and Angela Permunian, GSK Stockmann
1. Fintech Market 1.1 Evolution of the Fintech Market
package includes several regulations, three of which have already been adopted: • a pilot regime for market infrastructures based on DLT (see 2.5 Regulatory Sandbox ); • a regulation focused on digital operational resil - ience (see 2.11 Implications of Additional, Non- Financial Services Regulations ); and • a regulation on markets in crypto-assets (see 10. Blockchain ). In addition, the EU Artificial Intelligence Act (the “AI Act”), which came into force in August 2024, provides a legal framework aimed at managing and mitigating the risks associated with AI – in particular, to protect human rights, safeguard sustainability and encour - age investment to promote AI innovation across Europe. The new anti-money laundering (AML) direc - tive includes an obligation for all crypto-asset service providers involved in crypto-asset transfers to collect and make accessible data on the originators and ben - eficiaries of the transfers they operate (see 10.3 Clas- sification of Blockchain Assets ). Upcoming Changes in EU Legislation As further elaborated in this chapter, many topics relating to virtual assets and other recently developed technologies used in the financial sector had not been explicitly covered by the traditional financial services regulation. The Markets in Digital Assets Regulation (MiCA) has significant regulatory influence on digital assets by creating a single regulatory framework for three main types of digital assets: • asset-referenced tokens (ARTs); • electronic money tokens (EMTs); and • utility tokens. With the full implementation of MiCA since 30 Decem - ber 2024, digital asset issuers and service providers (CASPs) are subject to licensing and oversight by national authorities, facilitating a harmonised and secure EU digital market. The Digital Operational Resilience Act (DORA), which took effect in January 2025, has a significant impact
Luxembourg is a major European banking and wealth management centre. As a recognised EU hub for fin - tech companies, banks, asset managers and insur - ance companies, Luxembourg has a highly developed financial services ecosystem. Since 2007, when the fintech pioneer PayPal received a full banking licence in Luxembourg, the country has seen robust growth and has now become a home for over 200 fintechs. In particular, Brexit has led to an increase of UK com - panies engaging in fintech activities in Luxembourg to access the European market and benefit from EU passport authorisation. Furthermore, Luxembourg has a national fintech platform, the Luxembourg House of Financial Technology (LHoFT), which brings together innovators, financial institutions and public authori - ties to support and accelerate fintech innovation in Luxembourg. An executive order from the US President prohibit - ing US federal agencies from undertaking any action to establish, issue or promote Central Bank Digital Currencies (CBDCs) in the USA and abroad may slow down international projects to develop CBDCs, including in the Eurozone, in favour of stablecoins. Impact of Legislative Developments Luxembourg’s economy heavily relies on financial services, which account for around a quarter of the country’s economic activity. As a result, developing effective financial regulations is a key policy concern for the Luxembourg legislature. The newly published Blockchain IV Law, which entered into force on 31 December 2024, integrates and formalises the use of blockchain technology – specifically distributed ledger technology (DLT) – in the management of dematerialised securities, both debt and equity. At the EU level, the EU legislature has made efforts to regulate various aspects of fintech. To ensure consist - ency and clarity in the regulatory framework across Europe, the European Commission introduced the Digital Finance Package in September 2020. This
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