Luxembourg could help asset management companies overcome the uncertainties and costs associated with implementing DLT and asset tokenisation by developing a national initiative, a report has suggested.
Published at ICT Spring 2023, “Luxembourg: the epicenter of the tokenisation era” was commissioned by Tokeny, the Luxembourg House of Financial Technology and the Luxembourg Blockchain Lab.
“Given Luxembourg’s national interest in becoming a digital pioneer and its focus on sustainability in the finance industry, it could be beneficial for the country to provide incentives and support for a national initiative,” the report writes, adding: “By offering incentives, such as funding programs, regulatory support, or research collaborations, Luxembourg can encourage the Asset Management industry to actively explore and gain knowledge and experience in DLT and asset tokenisation.”
The report argues that sustainable investments offer a “compelling case” for driving innovation and adoption of DLT, which could boost “visibility and traction for broader adoption of DLT and asset tokensation.”
“The convergence of sustainability and DLT will generate significant interest, visibility, and support from both local and global players,” it writes, adding: “This alignment will play a pivotal role in fostering the adoption of DLT in the fund industry, bringing about positive changes in the financial landscape.”
The white paper offers a comprehensive overview of the technical possibilities of tokenization, the place of DLT-based securities registers within Luxembourg law and the challenges and opportunities for the Luxembourg market.
“DLT does not alter the legal nature of enforceability of securities and offers a myriad of benefits such as reducing intermediary costs and facilitating the transfer and exercise of holders’ rights,” it concludes, adding that the potential rewards for Luxembourg’s financial industry are “real”.
Head of the Blockchain Lab Emilie Allaert told Silicon Luxembourg after the report was published: “The legal framework is working, the tech is there and the business presents challenges and opportunities. We need to collaborate more and exchange experience as all financial institutions face the same difficulties and with more collaboration, we could potentially be more reactive in terms of interoperability.”
