The financial sector is not immune to the rapid evolution of modern technologies, which are undergoing profound transformations. After the introduction of dematerialised securities and the development of the notion of "book entry securities", a new law of 1 March 2019 (the “New Law”) has now amended the existing legal framework with the view to strengthen and ensure legal certainty in order to take into account technological developments in secure electronic recording, such as distributed ledger technology (DLT) and, in particular, the blockchain type technology, following the trend of neighbouring countries, some of which are particularly active in this field.
The New Law aims to extend the scope of the law of 1 August 2001 on the circulation of securities (the “2001 Law”) in order to allow account holders to hold securities accounts and to register securities by means of secure electronic recording devices including registers or distributed electronic databases of the blockchain type.
The New Law operates a legal fiction essential for its proper functioning by recognising that successive registrations of securities in a blockchain have the same effect as those resulting from transfers between securities account. For the sake of legal certainty, it expressly confirms that the maintenance of securities accounts within DLTs or the recording of securities in securities accounts through such DLTs does not affect the fungibility of the securities concerned.
Luxembourg has reacted promptly to the legal advances made by neighbouring countries, while still proceeding cautiously by limiting itself to a partial recognition of this new form of dematerialisation. Is this a first step towards the emergence of a new form of financial securities, a dematerialized security represented by a token in the blockchain? A necessarily more global reflection will be needed before reaching such a conclusion.
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