Crypto Assets Luxembourg Survey: “Persistence Amidst Headwinds”

Nasir Zubairi, CEO of the LHoFT (Photo © Silicon Luxembourg)

The LHoFT, together with PwC Luxembourg and with the active support of the Association of the Luxembourg Fund Industry (ALFI), has published the second edition of the Crypto-Assets Management Survey. The report provides a deep dive into the state of the crypto-assets market in the grand duchy after a year filled with global shocks.

A total of 127 industry practitioners responded to the survey conducted in Q1 2023 and while it was a decidedly pessimistic year for crypto-assets, the survey suggests that they continue to hold promise for the Luxembourg financial center.

“With every challenge comes an opportunity for growth and transformation. The findings of our Crypto-Assets Management Survey reveal that Luxembourg’s financial centre remains open to and opportunistic with innovation. I am invigorated by the evolving perceptions and the potential for developments in relation to crypto-assets in Luxembourg,” said Nasir Zubairi, CEO of the LHoFt Foundation.

Some key statistics from the survey:

  • 39% of respondents believe the global crypto-assets market is still in its early stages and holds significant potential, while 33% see it as reaching an inflection point towards broader adoption and maturity.
  • Recent shocks to the global crypto-assets market have not significantly discouraged stakeholders in Luxembourg, as 34% see these events as being the consequence of corporate governance and due diligence failures, while 23% see the current moment as an opportunity to rebuild. 
  • There is a significant increase in respondents who view Luxembourg as being aligned with the leading financial centres in Europe in the area of crypto-asset management and a concurrent decrease in respondents who consider Luxembourg a laggard in comparison to EU counterparts. 
  • The main constraints to broader crypto-assets adoption in Luxembourg are lack of maturity of relevant market infrastructures, the high volatility of crypto-assets, and the high AML risks perceived to be inherent to the asset class.
  • Looking forward, a majority of respondents view a strengthening of investor education as an absolute imperative in terms of investor/customer protection while another quarter agree that there is a need to strengthen financial education around the topic without having strong views on a particular approach.
  • 71% of respondents believe crypto-assets will be from somewhat to extremely important for the future of asset management in Luxembourg.

Crypto-assets in Luxembourg: Opportunities in Pragmatism

As a global financial centre situated in the heart of Europe, gauging Luxembourg market participants’ views on crypto-assets is a crucial exercise that provides a strong overview of the role crypto-assets might play in the financial sector’s future development.

Overall, while enthusiasm might have slightly dissipated since the first edition of the survey, results indicate that crypto-assets remain a key point of interest for many stakeholders in the Luxembourg financial centre, many of whom are keeping a keen pragmatic eye on regulatory developments and examining how they will impact the crypto-assets market, both in Luxembourg and globally, in the coming years.

“While the value proposition of crypto-assets has not changed, the events of 2022 clearly impacted market participants’ trust which must now be rebuilt. So far markets have shown resilience in 2023 and it is now up to the crypto-asset industry to prove itself. Time has come for a reset and the entry into force of MiCA will certainly act as a catalyst here,” said Thomas Campione, CFA Director, Blockchain and Crypto-assets Leader, PwC Luxembourg.

To read the full report, see here.

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