On 27 July 2020, the Luxembourg Government introduced a draft law that would allow the issuance of dematerialized securities using distributed ledger technology (DLT) or blockchain. While previous amendments to existing legislation have tentatively incorporated DLT, this recent move aims to take things one step further, enabling tokens to be treated as dematerialized instruments. The bill offers two major changes.
In its first change, the bill now determines that DLT-based issuance accounts may be used for dematerialized securities. Previously, the Law of 1 March 2019 enabled custodians to register and hold their securities by way of ‘secure electronic registration devices, including distributed electronic registers or databases,’ referring to DLT and blockchain-based “securities accounts”. Its scope only covered the registration and transfer of securities by custodians.
However, an organization acting on behalf of the issuer, the central account keeper, has to keep a centralized record of the issued securities in an “issuance account”. Dematerialized securities issuance accounts are used for record-keeping purposes, recording the type and amount of securities issued. The latest law now enables issuance accounts to be based on DLT, as highlighted by lawyers Arendt.
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