Stablecoin issuer / redeemer in Luxembourg

Regulation (EU) 2023/1114 on Markets in Crypto-Assets (MiCA):

EUR-Lex MiCA Regulation

Authorization, not just Registration: MiCA will require firms providing "custody and administration of crypto-assets on behalf of third parties" to obtain a full authorization from a national competent authority (the CSSF in Luxembourg) to operate across the EU. This is a more stringent licensing regime than the current AML registration.

Explicit Requirement: MiCA explicitly mandates crypto-asset service providers offering custody services to:

Keep separate the crypto-assets of their clients from their own crypto-assets and ensure that this is achieved by using different blockchain addresses or distributed ledgers.

Keep separate the funds of their clients from their own funds, in accordance with national law.

MiCA Regulation (EU) 2023/1114, Article 67 ("Custody and administration of crypto-assets on behalf of third parties"): Specifically, Article 67(1)(b) addresses segregation.

Prudential Requirements and Professional Indemnity Insurance: MiCA introduces specific prudential requirements for crypto-asset service providers. For custodians, it requires them to:

Hold own funds (capital requirements) or a professional indemnity insurance to cover liability risks from their operations. The amount will depend on the type of service and associated risks.

Registration as a VASP: Entities providing "custodian wallet services" (which includes custody of virtual assets on behalf of clients) are considered Virtual Asset Service Providers (VASPs) under Luxembourg law. These VASPs are subject to registration with the CSSF for AML/CFT purposes.

The registration is governed by the Law of 12 November 2004 on the fight against money laundering and terrorist financing, as amended (the "AML Law"), which incorporated the EU's 5th AML Directive.

CSSF Circular 22/811 (and previous versions like 20/747 and 21/769 which it consolidates/replaces): This circular provides detailed guidance on AML/CFT obligations for VASPs.

Law of 12 November 2004 on the fight against money laundering and terrorist financing, as amended (the "AML Law"): This is the cornerstone legislation. It was significantly amended by the Law of 25 March 2020 to transpose the 5th AML Directive, explicitly including virtual asset service providers as "professionals" subject to AML/CFT obligations.

CSSF Circular 20/747 (as amended by Circular 22/815): This circular is crucial for VASPs as it consolidates and specifies the AML/CFT professional obligations under the amended AML Law for all entities subject to CSSF supervision, including VASPs. It provides detailed guidance on risk assessment, customer due diligence, internal organisation, and reporting requirements.

Issuance of virtual assets: Services related to the offering or sale of new virtual assets.

Identification and Verification:

Enhanced Due Diligence (EDD): Required for situations posing a higher ML/TF risk, including:

For corporate tax purposes: Treated as assets on the balance sheet, with profits/losses impacting ordinary taxable income.

Corporate Income Tax (CIT): Progressive rates, approximately 15% for profits up to €175,000, 17% for profits between €175,000 and €200,000, and 22.8% for profits over €200,000 (these rates are indicative and include the contribution to the employment fund).

Municipal Business Tax (MBT): Varies by commune, typically around 6.75% for Luxembourg City.