On 21.01.2021, law no. 7637 was adopt­ed by the Lux­em­bourg Par­lia­ment and aims to resolve the last uncer­tain­ties in the issuance and cir­cu­la­tion of blockchain based secu­ri­ties. The law mod­ern­izes the 1993 law on the finan­cial sec­tor and the law of 2013 on dema­te­ri­al­ized secu­ri­ties.

The new act of par­lia­ment reg­u­lates the issuance of dema­te­ri­al­ized secu­ri­ties through the use of secure elec­tron­ic reg­is­tra­tion mech­a­nisms, includ­ing dis­trib­uted elec­tron­ic reg­is­ters and data­bas­es. Con­se­quent­ly, fol­low­ing the Blockchain Act of 2019, the Lux­em­bourg gov­ern­ment sends anoth­er sig­nal that the pro­mo­tion of inno­va­tion and tech­nol­o­gy is one of its main objectives.

In addi­tion, the bill intends to open up the oper­a­tion of the cen­tral account hold­er for unlist­ed debt secu­ri­ties to cred­it insti­tu­tions and invest­ment firms, there­by extend­ing the scope of the law of 2013 on dema­te­ri­al­ized secu­ri­ties. The envis­aged exten­sion will allow these enti­ties to expand their range of ser­vices in the field of dema­te­ri­al­ized secu­ri­ties and will also allow issuers of unlist­ed debt secu­ri­ties to have access to a larg­er num­ber of par­tic­i­pants. Above all, cred­it insti­tu­tions and invest­ment firms of the Euro­pean Union (EU) will ben­e­fit from the new reg­u­la­tion, as until now only cer­tain reg­u­lat­ed Lux­em­bourg ser­vice providers were per­mit­ted to act as cen­tral account hold­ers in accor­dance with the law of 1993 on the finan­cial sector.

All enti­ties that want to act under the new bill are oblig­ed to have an ade­quate infra­struc­ture, con­trol and secu­ri­ty mech­a­nisms equiv­a­lent to those required for autho­riza­tion as a cen­tral account hold­er (as pro­vid­ed for in Arti­cle 28–11 of the Law of 1993 on the finan­cial sec­tor). This oblig­a­tion is nec­es­sary to ensure fair com­pe­ti­tion for all mar­ket par­tic­i­pants and high stan­dards in terms of qual­i­ty and security.

The new law not only pro­vides a space for inno­va­tion and devel­op­ment and opens the mar­ket for Euro­pean insti­tu­tions, but also adds legal cer­tain­ty to this high­ly promis­ing technology.

For fur­ther infor­ma­tion con­tact our legal team: legal@blackmanta.capital