Luxembourg’s Ministry of Finance is seeking a relaxation of DLT laws, reports Ledger Insights. The ministry has proposed a fourth DLT bill introducing a new optional role – that of a control agent. The intention is to create a new model of custody as an alternative to the current model, which “requires the establishment of a double-tier chain of custody between the central account holder and the secondary account holders”.
Under Luxembourg’s current system, the central account keeper in digital securities is the equivalent to a custodian and is responsible for the issuance and record keeping of said securities. The “double-tier chain of custody” refers to the requirement that the two sets of custodians – the central account keeper and account keeper reconcile with each other.
A main benefit of DLT is the shared ledger, which enables the reduction of this reconciliation burden.
One for all
The new bill proposes that the control agent will control the issuance of securities accounts, monitor ownership, and ensure that the DLT’s record of the number of securities issued matches the securities accounts held in custody – “similar to Germany’s concept of a crypto securities registrar,” notes Ledger Insights.
Despite these responsibilities, the control agent “doesn’t have a custody role”. Any EU credit institution, investment firm, or CSD can take on the role without being licensed in Luxembourg, although they do have to give notice to the country’s regulator, Commission de Surveillance du Secteur Financier (CSSF).
The Luxembourg government reveals that it hopes the amendments will create a “welcoming legal framework for digital securities, offering more flexibility, security and transparency to issuers and investors”.
