LUXEMBOURG Trends and Developments Contributed by: Alvaro Garrido Mesa and Bersaitz Alegre, Legal Node
The Place to be for Compliant Digital Assets’ Projects A key highlight in 2024 has been the increasing focus on regulatory-compliant digital assets pro - jects, including the issuance of digital assets and the provision of services related to digital assets. Luxembourg-based companies have been work - ing towards ensuring compliance, with many pioneering projects taking advantage of the legal certainty offered by a revamped regulatory framework. MiCA The year 2024 marked a crucial step for the European digital asset market with the phased implementation of MiCA. On the one hand, MiCA introduced a compre - hensive regulatory framework for crypto-assets (asset-referenced tokens, e-money tokens and other crypto-assets (such as utility tokens). This categorisation helps issuers and service pro - viders understand their obligations regarding capital requirements, governance structures and disclosure requirements, among others. Examples of Luxembourg-based issuances of crypto-assets under MiCA include the launch of the EURI stablecoin by Banking Circle, a Euro- pegged e-money token with the goal of enabling 24/7 access to digital money with out-of-hours settlement. On the other hand, MiCA developed the author - isation framework for Crypto-Asset Service Providers (CASPs), which must meet stringent regulatory, operational and security standards to receive regulatory approval. The Luxem - bourg regulator has taken a proactive approach by working closely with market participants to streamline the application process and provide guidance on compliance best practices. Stand - ard Chartered has been one of the first institu -
tions to obtain a CASP licence to provide crypto custody services in Luxembourg under the MiCA framework. In connection with MiCA, the European Securi - ties and Markets Authority (ESMA) has also pub - lished a set of guidelines and reports to develop on the MiCA regulatory framework. A key set of guidelines relates to the conditions and criteria for the qualification of crypto-assets as financial instruments. These guidelines elucidate the dis - tinction between crypto-assets under MiCA and financial instruments under Directive 2014/65/ EU of the European Parliament and of the Coun - cil of 15 May 2014 on markets in financial instru - ments (MiFID II). DORA Similarly, DORA has introduced a robust security framework with comprehensive cybersecurity measures that financial institutions and digital asset service providers, among others, must implement to achieve operational resilience. DORA’s impact extends to third-party technol - ogy providers, requiring them to meet stringent standards to ensure continuity of services and data protection. With the increasing adoption of blockchain tech - nologies in the financial sector, cybersecurity and code auditing have become key elements to ensure the trust and stability of the Luxem - bourg ecosystem. DORA imposes strict require - ments on technological risk management, incit - ing companies to conduct regular audits of their systems to detect and mitigate vulnerabilities. In this regard, specialised Luxembourg-based companies such as Sub7 Security are leading the way in smart contract auditing and cyberse - curity services.
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