Lawmakers in Luxembourg have recently passed a bill into law, legalising the use of blockchain technology in financial services.
According to an official announcement published by Luxembourg’s August house, on 14th February 2019, lawmakers in the country passed a bill 7363 into law.
This facilitates the use of blockchain technology within financial services and is designed to businesses operating in this sector more transparency and legality regarding the circulation and trading of securities.
Bill 7363 also has the potential to make transferring securities much more efficient by drastically reducing the number of intermediaries.
Taking a closer look at Bill 7363
The Chamber of Deputies, the country’s parliament, said: “The bill should provide greater certainty for investors and make the transfer of securities more efficient by reducing the number of intermediaries.”
In April 2013, Luxembourg had previously passed a bill making it possible to legally issue “dematerialised securities” via an alteration of a security law which was passed back in 2001.
Bill 7363 simply expands on the original 2001 law to account for technological developments, plus the registration and distribution of securities using secure electronic registration. For example, this includes distributed ledger technology (DLT) and blockchain technology.
The said amendment includes the addition of Article 18a, stating:
Account-keeper may hold securities accounts and make registrations of securities in securities accounts within or through secure electronic registration devices, including distributed electronic registers or databases. Successive transfers recorded in such a secure electronic registration device are considered like transfers between securities accounts. Holding of securities accounts within such a device secure electronic registration or registration of securities in securities accounts through such a secure electronic recording device does not affect the fungible nature of the securities concerned.
Does this new law make Luxembourg a top place to do business?
There’s no question that Luxembourg is starting to make a name for itself as a crypto-friendly nation. In fact, according to Ipsos, only 4% of the country’s population doesn’t own some sort of cryptocurrency. To put that into context, this percentage is the lowest rate of people owning crypto in any given country in the world.
It’s also made other various progressive movements in favour of cryptocurrency and blockchain technology over the past year.
In November 2018, the University of Luxembourg partnered up with VNX exchange, a trading platform, to enhance the security of digital assets. The partnership is also set to help the university develop higher levels of network security for digital assets too.
Luxembourg is also the home of one of the world’s largest cryptocurrency exchanges, Bitstamp.
What’s more, the Tokyo-based exchange, Bitflyer, has offices in Luxembourg too, after being granted a Payment Institution license allowing them to do business in the European Union.
Luxembourg’s favourable tax regulations for cryptocurrencies is yet another positive, with all digital currencies being classed as an intangible asset which isn’t taxable until it’s disposed of, plus the fact that it’s exempt from VAT.
However, the country’s top financial regulator, the CSSF, did warn investors against trading, stating that cryptos and ICOs aren’t being backed by any central bank and the market fluctuates too frequently at the moment.
Nonetheless, the legalisation of bill 7363, plus the country’s progressive attitude towards blockchain is undoubtedly pushing Luxembourg in the right direction. Only time will tell if it’ll become a number one haven for crypto investors.
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