Luxembourg Introduces Legal Framework for Blockchain-Based Securities

| Updated
by Bhushan Akolkar · 3 min read
Luxembourg Introduces Legal Framework for Blockchain-Based Securities
Photo: Sarah Marchildon / Flickr

The new legal framework mandates companies to register their securities offerings over the blockchain before distribution to investors.

On Thursday, February 14, the European nation introduced a new bill comprising of a legal framework for the securities issued over the blockchain network. The Luxembourg parliament – Chamber of Deputies – passed the bill with 58 members voting in support of the legislature.

The bill document reads that Bill 7364 aims to “provide financial market participants with legal certainty for the circulation of securities via blockchain technology”. It further notes that the bill should aim to provide better security for the investors while making the “transfer of securities more efficient by reducing the number of intermediaries”.

Registration of Securities

Considering the latest technological amendments, the bill also amends the 2001 law which mandates the registration and distribution of securities through secure electronic registration, “such as distributed ledger technology and in particular blockchain technology”.

Furthermore, the amendment specifically adds Article 18a to the law which states:

“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 do not affect the fungible nature of the securities concerned.”

Another official document which proposed the bill before passing notes that even blockchain securities should be treated as traditional securities. It says that the best way to do it is by using the token concept. “This is from the technological point of view a new type of dematerialized security, but to which are attached from a legal point of view the same rights as classic dematerialized securities”.

Blockchain Community Supports the Bill

The local blockchain community if Luxembourg has welcomed the recent passing of the bill by its government. Lhoft CEO Nasir Zubairi told Delano on Thursday:

“Though some would suggest that existing regulation was adequate, this new rule is welcomed in that it provides clarity on the settlement of securities by blockchain, removing ambiguity for Fintech firms and traditional institutions who are looking at Blockchain/DLT technologies as a means for reducing cost and optimising securities processes.”

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