A Guide to Anti-Money Laundering for Crypto Firms

Cryptocurrency Regulations in Luxembourg

AML Compliance Crypto Knowledge & Training

Is cryptocurrency legal in Luxembourg?

  • Cryptocurrencies: Not legal tender
  • Cryptocurrency exchanges: Legal, must register with the CSSF

There are no specific Luxembourg cryptocurrency regulations but the government’s legislative attitude towards cryptocurrencies is generally progressive. Finance Minister Pierre Gramegna has commented that, given their widespread use, cryptocurrencies should be “accepted as a means of payment for goods and services” in Luxembourg. Although cryptocurrencies are not legal tender they are considered intangible assets for tax purposes, and, in 2018, authorities issued advice on the tax treatment of cryptocurrencies which, in a business context, depends on the type of transaction involved. Accordingly, for tax purposes, use of cryptocurrencies as means of payment does not affect the nature of income, aligning compliance with Luxembourger tax rules.Cryptocurrency regulations LuxembourgIn 2018 the Commission de Surveillance du Secteur Financier (CSSF) issued a warning about the volatility of cryptocurrencies, their vulnerability to crime, and the associated risks of investing in ICOs – despite the warning Luxembourg’s progressive approach to crypto has endured. The CSSF has acknowledged the financial benefits of blockchain technology and Pierre Gramegna has spoken of the “added value and efficient services” that cryptocurrencies bring. Following those statements, in early 2019 lawmakers passed legislation that gave blockchain technology transactions the same legal status as those executed using traditional methods.

Luxembourg Cryptocurrency Exchange Regulations

Cryptocurrency exchanges or virtual currency platforms in Luxembourg are regulated by the CSSF and new crypto businesses (i.e. service providers or intermediaries that are receiving or transferring) must obtain a payments institutions license if they wish to begin trading.

The licenses impose AML/CFT reporting obligations under Luxembourg’s “electronic money” statutes: the first crypto license was granted in 2016 to Bitstamp, which trades in a range of currencies, including USD, EUR, Bitcoin, and Ethereum, and passports holders into other EU member-states. In 2018, following Bitstamp, the Japanese virtual currencies exchange platform, bitFlyer, was granted a licence. In 2020 amendments were made to Luxembourg’s AML/CFT laws introducing new registration and governance requirements for cryptocurrency and virtual assets service providers (VASPs). The amendments also clarified the legal definition of cryptocurrencies, VASPs, virtual assets, safeguarding, administrational service providers, and custodian wallets providers for regulatory purposes.

Future Luxembourg Cryptocurrency Regulations

Although there are no specific legislative steps on the radar for Luxembourg cryptocurrency regulation, we expect more crypto legislation to be forthcoming, especially given the introduction of the EU’s 5AMLD and 6AMLD that came into effect in December 2020 and the government’s’ desire to align with ESMA (on ICO, QFi’s, and UCIS) whilst driving its token and blockchain agendas.

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Is cryptocurrency legal in Luxembourg?

  • Cryptocurrencies: Not legal tender
  • Cryptocurrency exchanges: Legal, must register with the CSSF
There are no specific Luxembourg cryptocurrency regulations but the government’s legislative attitude towards cryptocurrencies is generally progressive. Finance Minister Pierre Gramegna has commented that, given their widespread use, cryptocurrencies should be “accepted as a means of payment for goods and services” in Luxembourg. Although cryptocurrencies are not legal tender they are considered intangible assets for tax purposes, and, in 2018, authorities issued advice on the tax treatment of cryptocurrencies which, in a business context, depends on the type of transaction involved. Accordingly, for tax purposes, use of cryptocurrencies as means of payment does not affect the nature of income, aligning compliance with Luxembourger tax rules.Cryptocurrency regulations LuxembourgIn 2018 the Commission de Surveillance du Secteur Financier (CSSF) issued a warning about the volatility of cryptocurrencies, their vulnerability to crime, and the associated risks of investing in ICOs - despite the warning Luxembourg’s progressive approach to crypto has endured. The CSSF has acknowledged the financial benefits of blockchain technology and Pierre Gramegna has spoken of the “added value and efficient services” that cryptocurrencies bring. Following those statements, in early 2019 lawmakers passed legislation that gave blockchain technology transactions the same legal status as those executed using traditional methods.

Luxembourg Cryptocurrency Exchange Regulations

Cryptocurrency exchanges or virtual currency platforms in Luxembourg are regulated by the CSSF and new crypto businesses (i.e. service providers or intermediaries that are receiving or transferring) must obtain a payments institutions license if they wish to begin trading. The licenses impose AML/CFT reporting obligations under Luxembourg’s “electronic money” statutes: the first crypto license was granted in 2016 to Bitstamp, which trades in a range of currencies, including USD, EUR, Bitcoin, and Ethereum, and passports holders into other EU member-states. In 2018, following Bitstamp, the Japanese virtual currencies exchange platform, bitFlyer, was granted a licence. In 2020 amendments were made to Luxembourg’s AML/CFT laws introducing new registration and governance requirements for cryptocurrency and virtual assets service providers (VASPs). The amendments also clarified the legal definition of cryptocurrencies, VASPs, virtual assets, safeguarding, administrational service providers, and custodian wallets providers for regulatory purposes.

Future Luxembourg Cryptocurrency Regulations

Although there are no specific legislative steps on the radar for Luxembourg cryptocurrency regulation, we expect more crypto legislation to be forthcoming, especially given the introduction of the EU’s 5AMLD and 6AMLD that came into effect in December 2020 and the government’s’ desire to align with ESMA (on ICO, QFi’s, and UCIS) whilst driving its token and blockchain agendas. [cta_card title="Download the Full Guide" cta_img="" category="" bodytext="Discover more about the importance of AML for crypto firms and what is needed to build a robust compliance process." cta_text="Download now" cta_url="https://complyadvantage.com/insights/crypto-aml-guide/#access-form"]

Originally published November 7, 2018, updated July 18, 2022

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