SOTIRI Erwin

In Luxembourg, several legal structures can be used for tokenizing assets, with the choice depending on the nature of the asset, the investment strategy, and regulatory considerations. Common structures include: Special Purpose Vehicles (SPVs): Often used for asset tokenization to isolate the asset from the promoters and provide a clear legal structure for investors. Société Anonyme (SA), Société à responsabilité limitée (SARL), and Société par actions simplifiée (SAS): Corporate forms that can issue shares, which may then be tokenized. Securitization Vehicles: Governed by the Law of 22 March 2004 on securitization, these vehicles allow for the issuance of securities, including tokenized securities, to investors, reflecting the value and cash flow of the underlying assets.

Tokenization refers to the process of converting rights to an asset into a digital token on a blockchain. In Luxembourg's financial market, this can encompass a wide range of assets, from real estate and commodities to shares in companies. The primary legal framework governing these activities includes the Law of 1 March 2019, known as the Blockchain Law II, which introduced a secure mechanism for the transfer of securities using blockchain technology, and the general regulatory landscape as overseen by the Commission de Surveillance du Secteur Financier (CSSF).

The tokenization of securitized assets in Luxembourg is governed by a series of laws that have progressively established a legal framework conducive to the use of Distributed Ledger Technology (DLT) for financial transactions, including the tokenization of securities. The key Luxembourg laws relevant to the tokenization of securitized assets are: 1. The Blockchain Law I: Officially known as the Luxembourg Law of 1 March 2019, this law amended the Luxembourg Law of 1 August 2001 on the circulation of securities. It allows securities accounts to be maintained on DLT platforms and for securities to be transferred using blockchain technology. This law was a significant step in recognizing the legal validity of blockchain-based transactions for securities. 2. The Blockchain Law II: Enacted on 22 January 2021, this law further amended the Luxembourg Law of 6 April 2013 on dematerialized securities. It expanded the legal framework to allow for the maintenance of securities issuance accounts and the registration of dematerialized securities through secure electronic registration mechanisms, including DLT. This law facilitates the issuance and management of tokenized securities by recognizing the use of blockchain for these purposes. 3. The Blockchain Law III: Passed on 15 March 2023, this law supplements the EU DLT Pilot Regime in Luxembourg. It explicitly recognizes the possibility of using DLT instruments for financial collateral arrangements. This law is part of Luxembourg's efforts to support the development of DLT market infrastructures and to enable financial market participants to fully leverage the opportunities offered by blockchain technology for financial transactions, including the tokenization of securitized assets. 4. Law of 5 April 1993 on the Financial Sector, as amended: Outlines the regulatory requirements for professionals engaging in financial services, potentially including services related to tokenized assets.

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