New Blockchain Law in Luxembourg Paves Way to Mainstream Adoption

Luxembourg lawmakers delivered a perfect Valentine’s Day gift to all blockchain lovers and financiers on Feb. 14 when they passed a new blockchain bill into law. The document grants all transactions performed with the help of this technology the same legal status as those made via traditional means. 

Bill 7363, proposed by Luxembourg’s Finance Minister Pierre Gramegna, passed with 58 votes in favor and 2 against it. The new document legitimized the use of tokens and distributed ledger technology for managing securities accounts. Token has been defined by the law as a digital asset stored on the blockchain and has become synonymous with dematerialized securities. Tokens are from now on to be governed accordingly. And blockchain technology is now considered a legal and standard means of distributing securities. This has a number of advantages, such as improved safety of these digital assets because of blockchain’s inherent immutability, as well as better access to dematerialized securities. Blockchain serves as a unique registry for all the transactions involving these new types of securities but until recently there has been some ambiguity in governing distributed ledger technology. This led officials and entrepreneurs to seek better regulation and dedication to solving the issue from the government.

Prior to the passing of the bill 7363 these calls for action prompted Pierre Gramegna to reassure Luxembourg’s fintech community that there were several bodies already in place working on resolving the issues of governing blockchain technology and digital assets. He said that the financial center high committee (HCPF) already served as a task force that was looking into regulatory measures. He also said that other members of Luxembourg’s fintech ecosystem including Luxembourg House of Financial Technology (LHoFT), University of Luxembourg’s Interdisciplinary Center for Security, Reliability and Trust (SnT) and Luxembourg for Finance were also taking part in the dialogue on blockchain and digital asset regulation.

This has been yet another proof that officials and entrepreneurs can come together as one and resolve important issues as a community.

The passing of this law matters to the VNX Exchange community because it validates the underlying distributed ledger technology that serves as a backbone for our platform. It matters to the financial industry in Luxembourg and other European countries because blockchain adoption brings its players a step closer to a different future. In this future cross-border financial transactions, relationships between different financial institutions and retail investors are made easier.

Luxembourg has long been on the forefront of supporting large-scale blockchain adoption. As Luxembourg Times has rightly pointed out, without this law it would have been hard for the country to complete for a prime spot as the go-to jurisdiction for blockchain in Europe. 

And it will no doubt be a race. In fact, it’s already happening. In mid-December the European parliament issued a resolution seeking to promote the adoption of blockchain in the EU. 

“The EU has an opportunity to become a leading actor in the field of blockchain and international trade, and […] it should be an influential factor in shaping its development globally, together with international partners,” the resolution reads.

European countries have long surpassed the US in how far they are willing to go in adopting blockchain technology. Europe, and Luxembourg as one of its leading fintech hubs, is well positioned to take the lead.

Within VNX Exchange and our community the goal has always been to use the best technology for our trading platform. This is why in late November VNX signed a partnership with the University of Luxembourg’s Interdisciplinary Centre for Security, Reliability and Trust (SnT) at Le Freeport, to ensure security on blockchain and safety of digital asset transactions. 

The partnership aims to create a new standard of security for the market ecosystem for digital assets.The resulting technology may halve the global costs for cybersecurity.

“In creating a secure and regulatory compliant marketplace for the transparent trading of tokens representing digital assets we aimed to introduce modern security mechanisms that could totally secure our platform and could impact the global cybersecurity market,” Alexander Tkachenko, VNX Exchange founder and CEO said when announcing the partnership.

The partnership between SnT and VNX will help to better position Luxembourg as a globally recognized financial center, a world leader in digital financial services and a financial technology hub. It will also contribute to placing the country at the forefront of security creation for digital assets in Europe and beyond.

Through the partnership, researchers at the Interdisciplinary Centre for Security, Reliability and Trust (SnT) will move fintech closer to the goal of a secure marketplace by developing higher levels of network security than those currently available for crypto assets. They will design new IT frameworks facilitating the secure exchange of digital assets on blockchain networks. The research will also assess several distributed ledger architectures.The two partners strive to contribute to the introduction of regulation and cybersecurity to blockchain, allowing the creation of reasonable rules that will balance the interests of all involved players.

Blockchain technology is a perfect tool for creating digital assets. Tokenizing venture capital funds’ portfolios is one way to use blockchain to create such assets. ”The token economy is arriving and venture capital is on the front lines,” writes VentureBeat. 

Its author, Stephen McKeon, is a chief strategy advisor at the Security Token Academy and a finance professor at the Lundquist College of Business at the University of Oregon.

“In the coming years, blockchain tokens will offer VC funds a new mechanism to raise capital and maintain control of the investor base, and the impact will not be confined to those firms investing in blockchain technology,” he writes.

Raising capital and solving the issue of long capital lock-in and lack of liquidity that venture capital funds have historically faced is exactly the problem VNX Exchange is trying to solve. By offering tokenized VC portfolios for trading, our platform delivers that one-two punch that the financial industry needs to open up for more investors.

“Once investors in VC funds develop a taste for a liquid secondary market, it will be hard to pull them away,” writes McKeon.

At VNX Exchange we welcome this development that will not only enrich the local blockchain and fintech ecosystems but will also serve as a bridge between traditional financial instruments and new technologies.