Luxembourg

#37

Crypto Exchanges & Regulation – Top exchanges in Luxembourg by Coincub criteria

Country facts

Luxembourg crypto score

Trade and store crypto

Can I buy Bitcoin and cryptocurrency in Luxembourg? Sure.

An introduction to Bitcoin and cryptocurrency trading in Luxembourg

Luxembourg is a thriving economy with a strong financial sector that in  2020 accounted for some 25% of GDP and not surprisingly has welcomed the establishment of Bitcoin trading platforms. Like many countries, it began the Bitcoin cycle with little or no regulation over cryptocurrency, but things soon changed. Any company or person wishing to engage in virtual assets service provision must receive authorization from the Ministry of Finance.

In a progressive move in 2019, a law was passed officially recognized tokenized securities putting them on a par with traditional securities and allowing the transfer of securities via distributed ledger technology.

Overall, Luxembourg is a progressive cryptocurrency advocate and known as a pioneering fintech hub to boot, so inevitably, all things crypto and blockchain are given as much support as possible to maintain the country’s position. Indeed the country has been responsible for the initiation of many progressive proposals and is looking to harmonize its regulatory approach with forthcoming EU proposals for the crypto and blockchain industries.

As a European Union member, the EU’s proposed Regulation on Markets in Crypto Assets (MiCA), which is part of the EU’s Digital Finance Strategy, is what Luxembourg and other members are waiting for. A coherent and innovative-friendly crypto-assets regulatory framework is the holy grail that member states seek, with a stronger focus on consumer protection, market integrity, and financial stability.

Bitcoin mining in Luxembourg

Luxembourg is yet another cool-ish country that has a healthy appetite for Bitcoin mining. As the price of Bitcoin rises from the ashes of 2022, mining around the world has become viable again – despite the high operating costs. Luxembourg, it seems, is a very enthusiastic Bitcoin mining country with reports of not only individuals setting up mining operations – usually outside of city centers in the lush countryside but also well-organized companies which establish larger-scale mining facilities.

The key reason is low-cost energy – electricity prices in Luxembourg are one of the lowest in Europe. There’s also an open attitude towards mining from the government – although increasingly, environmental concerns are coming to the fore, as elsewhere. The prevalence of data centers and other facilities that complement large-scale mining operations are easily accessible. In short, there are no restrictions on the mining of Bitcoin –or others – provided that the operations do not violate specific statutory licensing obligations.

 A Luxembourg CBDC?

In late 2022, the Banque de France and the Banque centrale du Luxembourg assisted together the European Investment Bank (EIB) in the Venus Initiative (what a lovely name?).

The initiative provided a form of a token that represented euro central bank money described being an experimental Central Bank Digital Currency (CBDC).

The Venus initiative consisted of a 100 million euro digital native bond issuance by the European Investment Bank under Luxembourg law. The digital native bond was issued and registered using Distributed Ledger Technology (DLT) jointly operated by the Banque de France and the Banque Centrale du Luxembourg.  The Venus initiative was very much an experiment, but yet another seriously enacted one, in coordination with major private banks showing how digital assets can be issued, distributed, and settled within the Eurozone, in a single day. Looks like sooner or later a CBDC in some form or another is coming to a home near you soon!

Taxes in Luxembourg

Bitcoin taxation in Luxembourg 

As a good, dependable member of the EU, Luxembourg naturally taxes crypto gains – and quite heavily too. Any investor whose crypto gains came from speculation (are there any other kinds?) is going to pay tax. More seriously, if the gain occurred within 6 months from the purchase – and shows a total profit of at least 500 euros then it will be liable for tax – so there is some leeway. In the above case, the gain is subject to the standard rates of individual income tax, up to a maximum of 45.78% (ouch!) For anyone trading regularly and professionally, any gains will be liable to the standard individual income tax rates up to a maximum of 45.78% – so no 500 euro breathing space if you’re doing it for a living.