Luxembourg joins Cryptosecurities Club

While France may have DEEP Securities, Luxembourg now has ‘DEES securities’. These securities refer to securities transmitted by way of a “dispositif d’enregistrement électronique sécurisé” or, freely translated, a ‘secure electronic recording device’. This concept includes distributed electronic registers or databases. In other words, Luxembourg is the latest EU country to implement legislation enabling cryptosecurities.

This happened by means of the Luxembourg Act of 1 March 2019
(hereinafter colloquially referred to as the Cryptosecurities Act), which entered into force on 9 March 2019.

The Cryptosecurities Act modifies the Act of 1 August 2001 regarding the circulation of securities (as amended) by adding an Article 18bis to it. The first paragraph of this new Article 18bis is as follows:

Le teneur de comptes peut tenir les comptes-titres et effectuer les inscriptions de titres dans les comptes-titres au sein ou par le biais de dispositifs d’enregistrement électroniques sécurisés, y compris de registres ou bases de données électroniques distribués. Les transferts successifs enregistrés dans un tel dispositif d’enregistrement électronique sécurisé sont considérés comme des virements entre comptes-titres. La tenue de comptes-titres au sein d’un tel dispositif d’enregistrement électronique sécurisé ou l’inscription de titres dans les comptes-titres par le biais d’un tel dispositif d’enregistrement électronique sécurisé n’affectent pas le caractère fongible des titres concernés.

This paragraph can be freely translated into English as follows:

The account provider may maintain securities accounts and make entries in securities accounts within or through secure electronic recording devices, including distributed electronic registers or databases. Successive transfers recorded in such a secure electronic recording device shall be considered as transfers between securities accounts. The maintenance of securities accounts within such a secure electronic recording device or the registration of securities in securities accounts through such a secure electronic recording device shall not affect the fungibility of the securities concerned.

Luxembourg’s conception of cryptosecurities is both broader and narrower than the implementations of cryptosecurities in France and Delaware, which were discussed in a previous post.

French legislation so far only provides a framework for non-listed securities; Delaware legislation so far only provides a framework for shares and not for other types of securities. The Luxembourg Cryptosecurities Act, by contrast, enables cryptosecurities in all instances where regular dematerialised securities can be issued.

However, by drafting its Cryptosecurities Act from the perspective of the provider of securities accounts, the Luxembourg legislator may give the impression that DLT’s primary added value is to serve as back office technology for intermediaries. In terms of back office technology, DLT may turn out to be somewhat unwieldy compared to the efficient back office software currently used by intermediaries. French and Delaware legislators, on the other hand, drafted their bills from the perspective of the issuer of securities. This leaves more leeway for ‘disruptive’ applications of DLT.

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