Answer ... Luxembourg’s economy continues to boom and the same trend is expected to characterise the fintech sector. It is anticipated that an increasing number of fintech companies will set up shop in the country, thanks to its favourable financial system. Many e-payment and e-commerce giants – such as Amazon, Rakuten and PayPal, as well as EU-licensed crypto platform Bitstamp – have already gained a foothold in the Luxembourg market; others with similar business models are soon expected to follow suit. In addition, Luxembourg’s cloud-friendly regulatory framework and density of Tier 4 data centres – the highest in Europe – further attest to its efforts to attract more fintech companies.
The prevailing trends and predictions may be summarised as follows:
- More token offerings – in particular, security token offerings – are expected.
- The evolution of crypto-funds will present new economic and business opportunities that complement well-established fund activity.
- New platforms dealing with tokens and tokenisation will be established.
- Players are generally becoming more mature and specialised.
Circulation of securities: The Law of 1 March 2019 on the Circulation of Securities extends the scope of the Law of 1 August 2001 on the Circulation of Securities to allow account holders to book and transfer securities through secure electronic recording devices, including distributed electronic registers and databases such as blockchain.
CSSF initiatives: The CSSF has established and chairs a working group that brings together market participants with the aim of assessing the need to regulate certain activities.
A sub-working group was created to analyse the potential risks and challenges of blockchain technology and distributed ledger technology (DLT), and publish them in a white paper which will have no binding force on supervised entities. This white paper will also aim to highlight the elements to be taken into account in the due diligence process by fintech companies that intend to use these technologies, regardless of application. The white paper will therefore focus not on the use made of the technology from the point of view of services, but only on the generic technical aspects of these platforms, which are often poorly controlled by fintech companies.
Finally, now that DLT has been recognised in the legal framework, it is expected that further local legislative initiatives will follow, which should hopefully clarify the uncertainty that still surrounds issues of tokenisation.