Bill Of Law 7363 Was Approved On 14 February 2019 – Luxembourg's Confirmation That Securities Can Be Held Through DLT-Like Technologies, Including Blockchains!

Digital ledger technologies ("DLT") and blockchains in particular could disintermediate some of the main financial markets post-trade processes, fund distribution and the asset servicing value chain more generally, authors and experts say1. Certain authors believe that markets would become more efficient if the holding, clearing and settlement of securities as well as post-trade reporting were made through blockchains2. For example, transaction costs would be lower and transactions could be settled in close to real-time. These new technologies would also provide greater transparency for regulators (including with respect to KYC/AML) and investors. Even more, they would eliminate a number of risks associated with intermediation. In fact, it would put investors back in the position in which they were before the introduction of information technology in the financial markets sector: in direct contact with the issuer3. Nothing seems to impede such developments from a purely technical point of view. Current national and cross-border legal and regulatory regimes may not, however, be fully ready to govern such developments effectively.

As one of the first cornerstones of the Luxembourg legal landscape in relation to DLT's impact on the financial sector (which local players must learn to domesticate if Luxembourg is to keep its leading position in the global fund and asset servicing industry), the Luxembourg government has on 27 September 2018 published a Bill of Law 7363 (the "Bill of Law") which has been approved by parliament on 14 February 2019 (the "Amendment") inserting a new Article 18bis in the amended Luxembourg Law of 1st August 2001 concerning the circulation of securities (the "2001 Law"), as follows (free translation):

"Art. 18bis. (1) The account keeper may hold securities accounts and register securities in securities accounts within or through secure electronic registration devices, including distributed electronic registers or databases. Successive transfers registered in such a secure electronic registration device are considered transfers between securities accounts. The holding of securities accounts within, or the registration of securities in securities accounts through, such a secure electronic registration device do not affect the fungibility of the securities concerned.

(2) Neither the application of this law, nor the location of the securities which continue to be held with the relevant account keeper, nor the validity or...