Luxembourg

Luxembourg had one of the most crypt friendly regulations. In 2024, Luxembourg will be adopting the broader MiCAR regualtions. Here are the details

Question	Details
Rules for asset issuance on a digital ledger?	Luxembourg has integrated MiCAR regulations, establishing comprehensive rules for issuing crypto-assets on a digital ledger. The CSSF is the supervisory authority responsible for overseeing compliance. It requires registration for any provider issuing digital assets, and those issuing asset-backed or payment tokens need to comply with stringent AML/CFT regulations.
Clarity on resale of digital assets?	Resale of digital assets must comply with AML/CFT regulations. Any transaction needs to pass due diligence checks to prevent money laundering and terrorist financing risks. There are no specific restrictions on resale, but regulatory clarity is provided for platforms that facilitate these transactions, particularly in terms of transparency and reporting.
Trading restrictions on digital assets?	Trading of digital assets, including utility and payment tokens, is governed by MiCAR and the AML/CTF Law. Providers need registration under the VASP regime, and there are restrictions regarding derivatives trading of virtual assets. Trading must adhere to compliance measures set forth by CSSF, and platforms must ensure operational risk controls.
Custody of digital assets?	Luxembourg mandates that depositaries of digital assets, especially for funds, establish organizational arrangements for safekeeping virtual assets. Depositories must notify the CSSF before providing services, and in cases of custodian wallets, responsibility lies with the specialized service provider. The IFM's involvement must be clearly defined.
Dispute resolution for digital assets?	Dispute resolution mechanisms follow Luxembourg’s general commercial dispute procedures. CSSF mediates disputes, and entities can appeal to the court if necessary. The process involves both civil law and regulatory oversight by CSSF to ensure compliance with asset recovery and consumer protection laws.
Restrictions on promoting digital assets?	Promoting digital assets is closely monitored by CSSF, requiring compliance with advertising standards, particularly for asset-backed and stablecoins. Misleading promotions are prohibited, and platforms must disclose the risks associated with investments in virtual assets, especially regarding volatility and security risks.
Process for filing digital asset issuance?	The process for filing includes submitting a detailed description of the project, valuation policies, risk management strategies, and investor target information to the CSSF. For asset-backed and utility tokens, obtaining a license as a VASP and a strategy authorization for “Other-Other Fund-Virtual Assets” is mandatory.
Important takeaways for VASPs?	1. Registration as a VASP is mandatory for trading or custody services. 2. AML/CFT compliance is critical. 3. Operational risk management and internal controls must be established. 4. All digital asset transactions must be reported. 5. Specific due diligence is required for asset management involving digital assets.
Important takeaways for digital asset issuers?	1. Issuers must ensure compliance with MiCAR regulations and CSSF guidelines. 2. Clear documentation and transparency in digital asset valuation is required. 3. Issuers must manage risks associated with volatility and liquidity. 4. Full disclosure of risks in promotions is mandatory. 5. Reporting obligations to CSSF must be timely and accurate.