Luxembourg introduces its initial digital securities in the form of treasury notes
Luxembourg's Blockchain Law 4, enacted at the start of 2025, has simplified the issuance process for dematerialised securities through distributed ledger technology (DLT). This groundbreaking law introduces the role of the control agent, who manages the issuance account of tokenised shares or units, oversees their custody chain, and ensures reconciliation between DLT issuance accounts and traditional securities accounts.
Yesterday, the Luxembourg State Treasury made history by issuing €50 million in digital Treasury notes using the HSBC Orion DLT platform. This move showcases Luxembourg's commitment to technology in financial infrastructure, as stated by Gilles Roth, Minister of Finance.
Under the new law, a broader range of institutions can serve as control agents, including traditional settlement organisations, banks, and investment firms. Notably, passported EU banks and investment firms can act as control agents, offering flexibility and benefiting asset managers with an established EU presence.
The digital bond is natively digital, existing only on the blockchain, differentiating it from a tokenized bond. The notes will be listed on the Luxembourg stock exchange and carry zero coupon. They were sold at a discount of 99.03% of face value and will be redeemable at par in six months.
The innovation is significant, as it allows investors to directly hold digital securities in their personal wallets. The law facilitates the direct recording, transfer, and custody of ownership on blockchain platforms without intermediary central accounts, streamlining the framework and supporting Luxembourg's leadership in fund tokenisation.
The development in Luxembourg's blockchain laws follows the country's first blockchain law, enacted in 2019, and several iterations since. Luxembourg has been at the forefront of DLT innovation, with this issuance marking the second European state to issue using DLT, following Slovenia's bond last year.
The single control agent concept borrows ideas from Germany's eWpG. HSBC Continental Europe and BGL BNP Paribas were the lead managers for the issuance. HSBC's choice of Luxembourg as a hub for digital bonds is consistent with the country's prevalence in digital and tokenized funds.
The Ministry of Finance reported significant investor interest and views this as a learning experience. The issuance demonstrates the effectiveness of Luxembourg's blockchain laws, providing traceability, verifiability, greater confidence, and security for investors. Luxembourg remains the jurisdiction of choice for European digital issuances.
[1] Information sourced from Luxembourg Ministry of Finance.
- The recent Luxembourg government regulation, known as Blockchain Law 4, has expanded the eligibility of institutions to serve as control agents, including traditional settlement organizations, banks, and investment firms.
- Passported EU banks and investment firms can now act as control agents, offering flexibility and benefits to asset managers with an established EU presence.
- Yesterday, the Luxembourg State Treasury used the HSBC Orion DLT platform to issue €50 million in digital Treasury notes, showcasing the government's support for technology in financial infrastructure and leadership in fund tokenisation.
- The digital bond issued by Luxembourg is distinct from a tokenized bond as it natively exists only on the blockchain, offering investors the ability to directly hold digital securities in their personal wallets, streamlining the framework and providing traceability, verifiability, greater confidence, and security.
