Luxembourg passed legislation to provide financial market participants with legal certainty for the circulation of securities via blockchain technology. The bill is intended to give greater certainty for investors and make the transfer of securities more efficient by reducing the number of intermediaries. The bill was passed with 58 yes and 2 no.
“The purpose of this bill is to create a legal framework for the circulation of securities through new secure electronic registration technologies, including those based on the ‘blockchain’, with the aim of enhancing legal certainty in this area,” according to the bill’s language (translated from French).
The possibility of issuing dematerialized securities has been introduced into Luxembourg law by the law of 6 April 2013 on dematerialized securities, which has reshaped the amended law of 1 August 2001 on the circulation of securities.
In view of technological developments in recent years, the law provides for clarifying the existing provisions of the amended law of 1 August 2001 so that securities may also be registered and transferred using secure electronic registration mechanisms, in particular based on blockchain distributed ledger or ledger technology.
With regard to the operation of the securities accounts in the registers or ledgers distributed of the blockchain type, the easiest way today is to use the token concept: a token is schematically a digital asset stored in a blockchain that, like a title, paper or a classic paperless title, represents the “title”, legislators wrote in the draft bill.
“This is (from) a technological point of view a new type of dematerialized security, but to which are attached from a legal point of view the same rights as classic dematerialized securities”, according to the bill’s language.