Blockchain and legal certainty in Luxembourg

Blockchain, was initially created for digital currencies. It works by generating lists of records (the blocks) which are linked by cryptography. The blockchain saves a record of all information exchanges, or transactions in a ledger. Each verified transaction is added to the ledger as a block. The system is secure because the transactions cannot be altered once they have been signed and verified.



Luxembourg is known for its hands-on approach to blockchain technology. For example, in November 2018, the University of Luxembourg supported a Luxembourg-based trading platform for tokenized venture capital, VNX Exchange, in order to improve the security of digital assets by developing higher levels of network security. The High Committee for the Development of the Financial Centre (HCPF) serves as a task force on blockchain and lead to the creation of the Luxembourg House of Financial Technology. However, according to a study led by Ipsos for Dutch ING Bank B.V. in June 2018 disclosed that Luxembourg has the lowest rate of people owning cryptocurrency out of the 15 countries compared in the report with only 4%.


On 14 February 2019, Bill 7363 was passed into law in Luxembourg, easing the use of blockchain technology in financial services. The Bill lead to the amendment of Law of 1 August 2001 on the circulation of securities inserting the following Article 18bis:


(1) The account keeper may hold securities accounts and register securities in securities accounts within or through secure electronic registration devices, including distributed electronic registers or databases. Successive transfers registered in such a secure electronic registration device are considered transfers between securities accounts. The holding of securities accounts within, or the registration of securities in securities accounts through, such a secure electronic registration device do not affect the fungibility of the securities concerned.


(2) Neither the application of this law, nor the location of the securities which continue to be held with the relevant account keeper, nor the validity or enforceability of the security interests or collateral arrangements created under the amended Law of 5 August 2005 on financial collateral arrangements shall be affected by the holding of securities accounts within, or by the registration of securities in the securities accounts through, such a secure electronic registration device.”


The law does not directly refer to cryptocurrency but focuses only on the technology allowing new financial products and services. The aim of this law is to give legal certainty to investors using blockchain technology for their financial transactions. There is legal certainty when a legal system is predictable and transparent.


Currently there are no regulation or legal framework on blockchain at the EU level. Luxembourg is filling this gap by adopting the new law as it saw the opportunity to become a default jurisdiction for cryptocurrencies and Initial Coin Offerings. In parallel to this decision, the Commission de Surveillance du Secteur Financier, responsible for the financial regulation in Luxembourg, published warnings against investments in cryptocurrencies and Initial Coin Offerings (ICOs), arguing that they are “highly volatile and speculative investments, bearing a number of risks including total loss of investment.”


Author: Dr Fanny Tittel-Mosser

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