Luxembourg Cryptocurrency Laws Regulation of Digital Currencies: Cryptocurrency, Bitcoins, Blockchain Technology
Luxembourg does not regulate cryptocurrencies and in 2018, Luxembourg’s Financial Sector Monitoring Commission released a statement warning about the risks of investing in cryptocurrencies.[1] However, on March 1, 2019, Luxembourg enforced a law that officially recognized tokenized securities as having the same legal status as traditional securities, allowing the transfer of securities via distributed ledger technology.[2] For tax purposes, cryptocurrencies are not actual currencies but are considered intangible assets.[3] However, Luxembourg has recognized cryptocurrencies as currencies, but no regulation exists for them.[4] Cryptocurrencies are subject to the same regulation as financial service providers, subjecting cryptocurrency trading platforms to the same AML and counter terrorist financing (CFT) laws.[5]Any company or person wishing to engage in activities such as the issuing of means of payments in the form of virtual currencies, provision of payment services using virtual currencies, and the creation of a market platform to trade virtual currencies are defined as financial activities and must receive authorization from the Ministry of Finance.[6] Luxembourg has welcomed the establishment of Bitcoin trading platforms, licensing and approving BitFlyer, a major Bitcoin trading platform, to commence operations in Luxembourg in 2018.[7] The Financial Sector Supervisory Commission (CSSF) warned in 2018 that ICOs are not regulated in Luxembourg, but that depending on the ICO’s characteristics, an ICO may be subject to other laws and requirements.[8] Further, the CSSF assesses fundraising activities to determine if the Law of 10 July 2005 or the Law of 5 April 1993, regarding a scheme to circumvent or avoid financial sector regulations, is violated by the ICO’s activities. ICO issuers are required to implement AML and CFT procedures, and the CSSF is the authority overseeing virtual asset service providers, conducting the registration, supervision, and enforcement of AML/CFT procedures.[9] In short, ICO’s may fall under other financial sector laws in Luxembourg, and the CSSF advises issuers to ensure their activities comply with these other financial laws and requirements. The relevant laws are: Law of 10 July 2005; Law on the Financial Sector; Law of 30 May 2018; Law of 17 December 2010; Law of 12 July 2013; and Law of 12 November 2004.[10]
P.S. Insights on Cryptocurrency Legal Issues
Most jurisdictions and authorities have yet to enact laws governing cryptocurrencies, meaning that, for most countries, the legality of crypto mining remains unclear.
Under the Financial Crimes Enforcement Network (FinCEN), crypto miners are considered money transmitters, so they may be subject to the laws that govern that activity. In Israel, for instance, crypto mining is treated as a business and is subject to corporate income tax. In India and elsewhere, regulatory uncertainty persists, although Canada and the United States are relatively friendly to crypto mining.
However, apart from jurisdictions that have specifically banned cryptocurrency-related activities, very few countries prohibit crypto mining.
Our Freeman Law Cryptocurrency Law Resource page provides a summary of the legal status of cryptocurrency for each country across the globe with statutory or regulatory provisions governing cryptocurrency. The globe below provides links to country-by-country summaries:
[6] Schiltz & Schiltz, A General Introduction to the Regulation of Virtual Currencies in Luxembourg, Lexology.Com (Sept. 7, 2020), https://www.lexology.com/library/detail.aspx?g=8ff2b682-4877-479a-9260-670eb660efc3.
