Context and objectives

On 27 July 2020, the Luxembourg government submitted draft law n°7637 to the Luxembourg parliament. This draft law aims to modify the law of 5 April 1993 on the financial sector, as amended, and the law of 6 April 2013 on dematerialized securities.

The draft law is part of the modernization of Luxembourg's legal framework for financial transactions and is a continuation of the law of 1 March 2019 that recognized the possibility of using distributed ledger technologies for the circulation of securities.

Key aspects

The new draft law introduces two changes:

1. The draft Law provides legal certainty by introducing in the law of 6 April 2013 on dematerialized securities a definition of what constitutes an issuance account. Pursuant to this definition, an issuance account needs to be understood as an account held with a settlement provider or central book keeper which can be held by and allows for the recording of dematerialized securities by secured electronic recordings (including distributed ledger technology). The draft law highlights the technological neutral character of this new framework, which opens the door to the recognition of digital assets in specific cases.
2. It extends the scope of entities that can act as central account holders to European Union (EU) credit institutions and investment firms. Currently, only certain regulated Luxembourg service providers can act as central account keepers under the law of 5 April 1993 on the financial sector. This activity is implicitly limited to Luxembourg credit institutions and investment firms as well as Luxembourg branches of credit institutions and investment firms authorized in other EU member states. The draft law expands the role of central account holders to include any credit institution or investment firm authorized in a member state of the European Economic Area, provided they meet certain specific organizational and technological criteria.
    

How can Deloitte help?

Deloitte can help you to gain awareness on the subject and design your pragmatic strategy to allow you to manage the evolution of this new technology and to identify the potential impacts Distributed Ledger Technology may have on the securities value chain, including issuance, trading, post trading and custody services.

You can find out more about the business opportunities and regulatory framework related to securities services in a distributed ledger technology environment in our white paper “Are token assets the securities of tomorrow?”.

We will support you on various critical dimensions such as strategy, business & operating models, regulatory & compliance, technology, and risk management.

Deloitte’s Regulatory Watch Kaleidoscope service helps you stay ahead of the regulatory curve to better manage and plan upcoming regulations.

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