LUXEMBOURG Law and Practice Contributed by: Andreas Heinzmann, Valerio Scollo and Angela Permunian, GSK Stockmann
10.9 Decentralised Finance (DeFi) There are no specific regulations governing DeFi in Luxembourg. Since DeFi includes a broad range of financial services, it should be assessed on a case-by-case basis whether a certain activity or product would fall within the scope of existing financial services regulation. At European level, MiCA failed to directly address DeFi. Nevertheless, ESMA is actively monitor - ing DeFi developments and co-operating with international organisations such as the Internal Organisation of Securities Commissions and the Financial Stability Board. In addition, if a party facilitates the trading of security tokens or cryptocurrencies without any intermediary, MiCA shall not apply. 10.10Regulation of Funds While there is no specific regulation targeting funds that invest in blockchain assets, accord - ing to the recently updated ESMA Q&As on AIFMD, managers of an undertaking investing in crypto assets may be subject to the directive, if the relevant undertaking meets the definition of an alternative investment fund (AIF). Funds that raise capital from a number of investors to invest in crypto assets in accordance with a defined investment policy for the benefit of those inves - tors, will qualify as an AIF in accordance with the AIFMD. Although the AIFMD does not provide a list of eligible or non-eligible assets, the CSSF has published FAQs on the possibility of investment funds to invest in virtual assets. Pursuant to the position of the CSSF, an AIF may invest directly (and indirectly) in virtual assets if its units are marketed only to professional investors, and a Luxembourg authorised AIFM must obtain an authorisation from the CSSF for this investment strategy. Accordingly, the CSSF has indicated
Regime provides a possibility for MTFs and CSD to be exempt from certain provisions of CSDR. The CSDR, as amended, allows the possibility to grant authorisation to non-operational CSD whose compliance with regulatory requirements cannot be assessed, if the competent authority believes that the CSD will comply by the time it begins its activities. 10.6 Staking The provision of staking services relating to cryptocurrencies are neither addressed nor pro - hibited by MiCA. Nevertheless, the provisions of MiCA would apply in the event that a staking service provider holds crypto-assets in custody. If staking services are offered alongside other crypto-asset services, the CASP must obtain consent from the client before staking their crypto-assets. 10.7 Crypto-Related Lending The lending and borrowing services related to crypto-assets are not addressed by MiCA, but these activities are still subject to regulatory oversight, in particular for compliance with AML/ CFT standards. Furthermore, licensing may be required depending on the nature of services offered, such as collateralised loans or the use of fiat currencies. 10.8 Cryptocurrency Derivatives MiCA does not directly address cryptocurrency derivatives. However, derivatives that qualify as financial instruments with crypto-assets as their underlying asset are regulated under MiFID II. Since cryptocurrency is classified as a crypto- asset, these financial instruments fall under the regulation of MiFID II. Additionally, cryptocurren - cy derivatives are subject to the Market Abuse Regulation if they are traded on regulated mar - kets, MTFs, or OTFs.
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