Luxembourg law makers have passed legislation that will enable financial instruments to be traded or recorded via blockchain as part of a pilot initiative.
The new legislation implements EU legislation finalised last year which provides for distributed ledger technology-based financial markets infrastructure to be trialed for trading and recording tokenised financial instruments, such as cryptoassets.
The EU legislation is the potential precursor to broader legislative reforms to enable the use of blockchain-based trading in financial markets. The piloting initiative is designed to ensure the use of DLT does not weaken existing requirements and safeguards that apply to traditional market infrastructures.
The new Luxembourg legislation also updates earlier legislation governing financial collateral arrangements – which concerns obtaining security on loans – to explicitly recognise the possibility of using distributed ledger technology for financial collateral.
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