Securities Can Legally Be Held Through Blockchains

Digital ledger technology ("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 say. 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 blockchains. These new technologies would also provide greater transparency for regulators (including with respect to KYC/AML) and investors and would eliminate a number of risks associated with intermediation.

As one of the first cornerstones of the Luxembourg legal landscape in relation to DLT's impact on the financial sector, the Luxembourg government published a Bill of Law 7363 ("Bill of Law") on 27 September 2018 which was approved by Parliament on 14 February 2019 ("Amendment") inserting a new Article 18bis into the amended Luxembourg Law of 1 August 2001 concerning the circulation of securities ("2001 Law").

The Amendment provides additional legal certainty by expressly allowing securities to be registered and held via secure electronic registration devices...