LUXEMBOURG Law and Practice Contributed by: Andreas Heinzmann, Valerio Scollo and Angela Permunian, GSK Stockmann
In addition, since January 2022, the Luxembourg Stock Exchange admits security tokens to be reg - istered onto the Securities Official List (SOL), which marks an important step towards making DLT secu - rities mainstream and enhancing visibility. Owing to the current regulatory framework applicable in the EU, security tokens cannot be admitted to trading on a regulated market or MTF. However, thanks to the DLT Pilot Regime (see 2.5 Regulatory Sandbox ), MTFs can be granted temporary exemptions, for a period of up to six years, from certain existing requirements in order to enable DLT to also be used for trading (see 10.5 Regulation of Blockchain Asset Trading Platforms ). 10.2 Local Regulators’ Approach to Blockchain The CSSF has indicated that it applies a principle of technology neutrality towards the use of blockchain, and has acknowledged that innovative processes and technologies such as DLT, when properly used, can improve the provision of financial services. In line with this approach, in 2022, the CSSF published a non-binding White Paper to guide professionals in conducting due diligence on DLT in financial services. It aims at helping to assess the risks and benefits of such technologies by providing key questions and recommendations for risk analysis and due diligence. Overall, with the adoption of MiCA and the Blockchain IV Law, Luxembourg is emerging as a leading Euro - pean hub in the digital finance sector. The dual frame - work of EU and national legislation creates a secure environment for digital assets, digital securities and related technologies, and highlights Luxembourg’s commitment to aligning with EU objectives for inno - vation and market security. 10.3 Classification of Blockchain Assets There is currently no general legal framework or sin - gle legal definition of blockchain assets applicable in Luxembourg. Moreover, there are several related terms often used in this context – eg, the Luxembourg regulator does not use the term “blockchain assets” in its guidance but uses the term “virtual assets”, while the term “crypto-assets” has been used at an EU
level (such as in MiCA and in documentation issued by ESMA). Regardless of the terminology used, blockchain assets may or may not be considered a form of regulated financial instruments falling within the scope of exist - ing financial services regulation, and such assessment should be made on a case-by-case basis depending on the characteristics of the asset. With regard to AML/CFT legislation, the Luxembourg AML Law was amended in 2020 in accordance with the fifth EU AML directive (2018/843/EU), by introduc - ing the obligation of virtual asset service providers to register with the CSSF and to comply with certain AML/CFT obligations. Virtual assets are defined as a digital representation of value, including virtual curren - cies, that can be digitally traded or transferred and can be used for payment or investment purposes – how - ever, excluding virtual assets that fulfil the conditions of electronic money, as defined in the Payment Ser - vices Law, and virtual assets that fulfil the conditions of financial instruments, as defined in the Financial Sector Law. In addition, MiCA regulates crypto-assets that so far have fallen outside the scope of specific regula - tion, such as MiFID II. The definition of crypto-assets includes any digital representation of value or rights that may be transferred or stored electronically, using a distributed ledger or similar technology. The appli - cable new rules, which include transparency and authorisation requirements, will differ based on the characteristic of the token. 10.4 Regulation of “Issuers” of Blockchain Assets Luxembourg has steadily developed its blockchain framework over the past few years. In 2019, it intro - duced its first Blockchain Law, allowing DLT for hold - ing and managing securities. This was expanded in 2021 to enable the issuance of dematerialised securi - ties. Further updates in 2023 incorporated the EU DLT Pilot Regime and revised collateral arrangements, and in 2024 Blockchain Law IV reinforced Luxembourg’s position as a leading hub for DLT-based financial inno - vation.
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