Luxembourg Takes Major Step towards Blockchain Security with Adoption of Blockchain III Law

Luxembourg Parliament Adopts Landmark Legislation

Luxembourg, March 2023 - The Luxembourg Parliament has adopted the highly anticipated Blockchain III Law, marking a significant milestone in the country’s efforts to modernize its legal framework and promote blockchain technology.

Enhancing Financial Regulations

The new law amends key financial regulations, including the Financial Sector Law and the Financial Collateral Law, to better accommodate the use of distributed ledger technology (DLT) in the financial sector. The amendments are designed to enhance security measures for DLT-based transactions and provide greater flexibility for financial market participants.

Expert Insights

According to experts, the Blockchain III Law is a critical step towards the widespread adoption of blockchain technology in Luxembourg’s financial sector. “This law demonstrates the country’s commitment to embracing innovation and promoting digital transformation,” said Gauthier Van Gysel, a leading expert on blockchain regulation.

Key Provisions

The law implements key provisions of the EU DLT Pilot Regime Regulation, which allows national supervisory authorities to temporarily exempt DLT market infrastructures from certain requirements imposed by existing legislation. This will enable financial institutions to design and operate more efficient and secure blockchain-based solutions for trading and settlement of transactions in digital assets.

Clarification on Book-Entry Transferable Financial Instruments

One of the most significant changes introduced by the Blockchain III Law is the clarification of the concept of book-entry transferable financial instruments, which now includes DLT-registered financial instruments. This amendment provides greater clarity and legal certainty for financial market participants seeking to use blockchain technology for collateral arrangements.

Enhanced Definition of “Financial Instruments”

The law also amends the definition of “financial instruments” in the Financial Sector Law to include DLT-based instruments, further enhancing the attractiveness of Luxembourg as a hub for fintech innovation.

Effective Date and Expected Impact

The Blockchain III Law is effective from 17 March 2023, and its implementation is expected to have a positive impact on the country’s financial sector, providing greater legal certainty and enabling businesses to take full advantage of the opportunities offered by blockchain technology.