Luxembourg has been garnering attention from all around the world, thanks to the introduction of a new cryptocurrency framework that caters specifically to security tokens. Luxembourg is a financial hub in Europe and the more companies have their eyes on the country after the Brexit announcement. The nation now joined a queue among the countries that introduced clearly defined and laid out Security Token Offering (STO) regulations.
“It matters to the financial industry in Luxembourg and other European countries because blockchain adoption brings its players a step closer to a different future. In this future cross-border financial transactions, relationships between different financial institutions and retail investors are made easier”, said Anton Abashkin, COO of VNX Exchange based out of Luxembourg.
Security tokens are digital tokens that are backed by real securities which are tradeable financial instruments in the general sense of the word. STOs provide investors with security tokens and need to adhere to the regulations which specify how token issuers and investors must be treated and the rules they should follow while interacting in this ecosystem. STO regulations in Luxembourg are targeted at the protection of the interests of investors and in ensuring market integrity. Let’s understand the new regulations and their implications in greater detail.
A Glance at the Regulations in Luxembourg
As per the latest reports, a new bill was introduced on February 14 that specified a legal framework for STO regulations in Luxembourg using the blockchain technology as the main facilitator of the process. The bill was passed by the parliament and aims to remove the intermediaries involved in the transfer of securities, thus making the process much more efficient through peer-to-peer interactions. The new bill calls a security token a form of “dematerialized security”.
The STO regulations in Luxembourg now allow the legal circulations of securities based on the blockchain. The bill was passed by 58 representatives except for two who voted against it.
The new bill also amended the older 2001 law and included the blockchain technology among the secure electronic procedures which can be used to register and distribute securities in a legal manner.
Implications of the new STO Regulations in Luxembourg
The new STO regulations in Luxembourg will inevitably have far-reaching consequences. With the new legal framework for security tokens in place, the country has now joined the league of Gibraltar and Malta and will be a promising blockchain hub in the region. Since the city-state is considered the financial hub of the European Union, the move could trigger widespread crypto adoption.
The local blockchain community has welcomed the new STO regulations in Luxembourg with open arms. Since more and more companies are now turning to STOs as fundraising ventures, the presence of a well-defined legal framework will only serve to strengthen trust in the cryptocurrency ecosystem and encourage wider security token adoption amongst investors with the risks reduced.
With the new STO regulations, Luxembourg is now on its way to emerging as a pioneer in the STO space. Called Bill 7363, the regulations will give security tokens the same status as conventional securities. This was revealed in a document that was issued prior to the bill being passed. Exciting times lie ahead in the security tokens landscape as more and more nations around the world recognize the importance of this groundbreaking technology and the limitless opportunities it holds.