ABBL responds to the consultation on the Luxembourg’s Blockchain IV Draft Law

The ABBL has provided its opinion on Draft Law No. 8425, focusing on leveraging Distributed Ledger Technology (DLT) to modernise the issuance and custody of securities. With key recommendations for clarity and enhanced legal certainty, the ABBL aims to strengthen the position of Luxembourg at the forefront of financial innovation within the EU.

Leveraging Distributed Ledger Technology (DLT) for modernisation

This legislative proposal aims at leveraging cutting-edge technologies, particularly Distributed Ledger Technology (DLT), to modernise the issuance and custody of securities. By allowing a more flexible and digital-friendly environment, the Draft Law addresses the evolving needs of the financial sector and positions Luxembourg at the forefront of financial innovation within the European Union.

The primary objective of the Draft Law is to provide a robust legal framework for the issuance, custody, and transfer of dematerialised securities through innovative technologies like DLT. The Draft Law introduces the concept of Control Agent, a new role designed to complement traditional intermediaries such as Central Account Keepers and Central Securities Depositories.

ABBL’s key recommendations

Given the significance of the proposed changes and their potential impact on Luxembourg’s financial ecosystem, the ABBL finds it essential to provide suggestions and comments to ensure that the Draft Law is both comprehensive and practical in its application and benefits from additional clarification and refinement:

• Clarifying the role of the Control Agent: The ABBL supports the introduction of the Control Agent but suggests further clarification on its responsibilities, especially in relation to existing roles like Central Account Keepers and Central Securities Depositories.
• Aligning definitions with EU regulations: To avoid any ambiguity, the ABBL recommends including references to existing definitions of DLT and related terms, so that this alignment with EU regulations will provide more legal certainty.
• Detailed guidance on notification procedures: The ABBL calls for more detailed guidance on the documentation required for the Control Agent’s prior notification to the CSSF, and clarity on whether activities can start if no objection is raised by the CSSF within two months from the notification sent by the Control Agent.
• Expanding the DLT framework to equity securities: The ABBL supports expanding the DLT framework to include not only debt securities but also equity securities, allowing a broader application of DLT technology in the financial sector.

Moving forward: Continuous engagement

By providing thoughtful, well-researched feedback on this Draft Law, the ABBL seeks to ensure that the proposed legal framework is both practical and forward-looking. Looking ahead, the ABBL will continue to engage with lawmakers, regulators, and its members to fine-tune the legal framework for DLT and dematerialised securities and beyond.