Luxembourg's New Law: a Game Changer for Crypto Assets & Green Bonds?

The Law of 6 of February 2025 incorporates key European regulations on crypto-assets and European Green Bonds, updating Luxembourg’s legal framework to align with EU standards.

These developments position Luxembourg as a leading jurisdiction in regulatory compliance and innovation.

Below are the highlights:

1. Crypto-Asset Regulation (MiCA)

The Law of 6 of February 2025 implements Regulation (EU) 2023/1114, establishing a unified framework for issuing, trading, and providing crypto-asset services in the EU.

Key features include:

• CSSF supervision: The CSSF is designated as the authority to oversee compliance, with powers to:
• monitor activities and disclosures; and
• enforce sanctions to ensure market integrity and consumer protection.

2. European Green Bonds (EuGB)

To promote sustainable finance, the Law of 6 of February 2025 implements Regulation (EU) 2023/2631, which introduces uniform standards for labelling bonds as European Green Bonds.

Key measures include:

• Compliance oversight: The CSSF will ensure issuers meet reporting and disclosure requirements, while the European Securities and Markets Authority (ESMA) supervises external reviewers.
• Transparency requirements: Issuers have to publish fact sheets, allocation reports, and impact assessments to maintain investor confidence.

3. Enhanced CSSF powers and sanctions

The Law of 6 of February 2025 bolsters the CSSF’s enforcement capabilities under Regulations (EU) 2023/1113 and 2023/1114:

Supervisory and investigative powers:

• Access to documents, data, and communication records.
• Onsite inspections and seizure of evidence.
• Freezing or seizing assets and suspending non-compliant activities.

Enforcement and sanctions:

• Administrative actions: warnings, public reprimands, and orders to cease violations.

• Financial penalties:
• Fines up to EUR1 million (or EUR5 million for credit institutions) for fund transfer violations under Regulation (EU) 2023/1113.
• Fines of up to EUR15 million for crypto-asset market violations under Regulation (EU) 2023/1114.

• Criminal sanctions: prison sentences of three months to four years for insider trading or market manipulation.

4. AML/CFT updates for crypto-assets

The law amends the Anti-Money Laundering and Countering the Financing of Terrorism (AML/CFT) framework under the Law of 12 November 2004, adapting it to crypto-assets and self-hosted wallets.

Key changes include:

• Inclusion of Crypto-Asset Service Providers (CASPs) as obliged entities under AML/CFT regulations.
• Enhanced due diligence for:
• transfers involving self-hosted wallets; and
• transactions exceeding EUR1,000.

• Cross-border relationships:
• CASPs have to verify non-EU entities’ AML/CFT compliance and obtain high-level approval before establishing correspondent relationships.

• Transition for VASPs:
• Virtual Asset Service Providers (VASPs) registered by 30 December 2024 will be treated as CASPs until 1 July 2026 or until they're fully authorized under MiCA.
• The above implies that the VASPs regime will be repealed.

5. Modernization of the Financial Sector Law (LFS)

The annex of the Financial Sector Law has been amended to include:

• issuance of Electronic Money Tokens;
• issuance of Asset-Referenced Tokens; and
• provision of Crypto-Asset Services, such as trading, custody, and transfers.

These updates align Luxembourg with EU standards and ensure comprehensive oversight of crypto-asset activities.

6. Updates to the Payment Services Law

The Law of 6 of February 2025 revises the Law of 10 November 2009 on Payment Services to reflect:

• Regulation (EU) 2023/1113, extending traceability rules to crypto-assets;
• Regulation (EU) 2021/1230, modernizing cross-border payment frameworks; and
• Menhanced CSSF supervision for entities offering currency conversion services.

 

Why these changes matter

These reforms not only align Luxembourg’s legislation with evolving EU standards, they also reinforce its commitment to market integrity, consumer protection and sustainability. By integrating crypto-assets, green finance, and enhanced AML/CFT measures into a cohesive regulatory framework, Luxembourg is strengthening its position as a forward-looking global financial hub.