Crypto License in Luxembourg

Introduction to the Luxembourg Crypto License

Luxembourg, a leading European financial hub, has emerged as a highly respected and well-regulated jurisdiction for crypto businesses. With its proactive regulatory stance, modern digital infrastructure, and strong ties to EU markets, Luxembourg offers a robust foundation for companies seeking a compliant, scalable environment for digital assets.

Why Choose Luxembourg for a Crypto License?

• Reputable EU Jurisdiction: Recognized across Europe for financial transparency and regulatory excellence.

• EU Passporting: Licensed crypto businesses can operate across the entire European Economic Area (EEA).

• Blockchain-Friendly Environment: Government-backed initiatives support innovation in Web3, DeFi, and tokenization.

• Strong Legal Protection: Comprehensive investor protection, AML enforcement, and GDPR compliance.

• Access to Tier-1 Banking & Legal Services: Luxembourg is home to major law firms and financial institutions.

Additional Advantages:

• Multilingual workforce (French, German, English)

• Low corruption and stable governance

• Strategic location in Western Europe

• Home to the CSSF (Commission de Surveillance du Secteur Financier), the regulator for financial and crypto activities

• Direct alignment with upcoming MiCA framework for future-proof licensing

• Presence of global fintech hubs and accelerators

Types of Crypto Licenses in Luxembourg

1. Virtual Asset Service Provider (VASP) Registration

Crypto businesses must register as a VASP with the CSSF if they offer services such as:

• Exchange between virtual assets and fiat currencies

• Crypto-to-crypto exchanges

• Wallet custody services

• Transfer of virtual assets

• Operating trading platforms

• Launching ICOs with asset servicing components

2. PSAN (Prestataire de Services sur Actifs Numériques)

Similar to the French system, Luxembourg refers to VASPs providing a broad range of crypto-related services. Registration is mandatory and includes:

• Fit-and-proper assessment for directors

• Detailed AML/KYC policy submission

• Compliance officer appointment

• Audit trail and transaction monitoring systems

• Regular transaction monitoring and suspicious activity reporting

3. Electronic Money Institution (EMI) License

Applicable to projects issuing stablecoins or offering crypto payment services. The EMI license is governed by the EU’s Electronic Money Directive.

• Required for projects intending to operate regulated crypto wallets or issue e-money tokens

• Offers strong legal framework for fiat-crypto integration

4. Investment Firm License

For crypto brokers, asset managers, and advisory services. Requires higher capital thresholds and CSSF approval.

• Ideal for tokenized securities brokers and crypto asset portfolio managers

• Also allows algorithmic trading and execution-only services

Legal Framework for Crypto Regulation in Luxembourg

Luxembourg’s crypto regulation is shaped by:

• Law of 12 November 2004: AML/CFT laws applying to financial institutions and VASPs.

• CSSF Circulars: Provide compliance guidelines for IT, cloud infrastructure, and risk management.

• EU Directives: MiFID II, AMLD5/6, GDPR, and upcoming MiCA (Markets in Crypto-Assets Regulation).

• Règlement Grand-Ducal 2020: Defines technical and operational safeguards for VASPs.

MiCA Compliance:

Luxembourg is preparing for MiCA adoption in 2025, allowing seamless compliance for token offerings, crypto-asset service providers (CASPs), and DeFi platforms.

• Regulates utility tokens, asset-referenced tokens (ARTs), and e-money tokens (EMTs)

• Introduces CASP license for EU-wide operations

• Mandates whitepaper publication, authorization, and governance structures

Requirements for Obtaining a Crypto License in Luxembourg

• Luxembourg-registered company with a local address

• Appointed Compliance Officer (CO) and MLRO

• Directors with proven experience in finance or IT security

• Full AML/KYC program with ongoing monitoring

• Detailed business plan, including risk assessment

• IT infrastructure with encryption and audit trail capabilities

• Internal audit and governance policies

• Data protection policies aligned with GDPR

• Dedicated physical office or contractual service address in Luxembourg

Capital Requirements:

• VASP: EUR 50,000 to EUR 125,000 depending on the services

• EMI: EUR 350,000 minimum initial capital

• Investment Firm: From EUR 125,000 depending on the scope

Step-by-Step Licensing Process

Step 1: Pre-Licensing Strategy & Legal Structuring

• Incorporate a SARL, SA, or SCA in Luxembourg

• Define company purpose in the Articles of Association

• Appoint board members and designate roles

• Draft shareholder agreements and governance documents

Step 2: Draft & Prepare Licensing Package

• AML/KYC manual

• Business plan and risk matrix

• Details of UBOs and management

• IT security and data protection policy

• Conflict of interest policy and audit procedures

Step 3: Submit Application to CSSF

• Complete registration forms

• Upload supporting documentation via CSSF portal

• Pay the administrative fee

• Schedule initial consultation (optional)

Step 4: CSSF Review & Due Diligence

• Background check on management

• Technical capacity evaluation

• On-site inspections (in some cases)

• Dialogue on licensing scope and conditions

Step 5: License Issuance & Registration

• CSSF issues approval and registration as VASP

• Entry into the official CSSF registry

• Public disclosure of registration number and service types

Total Timeframe: 3 to 6 months

Ongoing Compliance Requirements

Licensed crypto firms in Luxembourg must:

• Submit annual reports to CSSF

• Conduct internal audits annually

• Train staff on AML, cybersecurity, and data privacy

• Maintain logs of all transactions and suspicious activity

• Appoint external auditor (for EMI and Investment Firms)

• Maintain up-to-date risk registers and operational manuals

• Notify CSSF of material changes to business model or UBO structure

• Periodic IT penetration testing and disaster recovery validation

Taxation of Crypto Businesses in Luxembourg

• Corporate Tax: 24.94% (standard, includes solidarity surcharge)

• No VAT on crypto transactions (as per EU CJEU ruling)

• Capital Gains Tax: Applicable for crypto held <6 months

• Tax Rulings: Available to optimize treatment for tokenized assets

• IP Box Regime: Offers reduced tax rate on income from qualified blockchain and fintech IP

Luxembourg also supports bilateral tax treaties for reduced withholding tax on dividends and interest.

Comparison With Other Jurisdictions

Use Cases for a Luxembourg Crypto License

• Crypto Exchanges seeking EU credibility and passporting rights

• Token Issuers preparing for MiCA-compliant offerings

• DeFi Platforms operating under regulatory clarity

• Stablecoin Projects needing EMI recognition

• Custody Providers for institutional clients

• Web3 Startups with a scalable legal foundation

• Asset Tokenization Platforms delivering regulated securities-as-tokens

• Payment Gateway Services that integrate fiat and crypto solutions

Contact Us for Crypto Licensing in Luxembourg

We provide:

• Legal entity incorporation

• VASP/EMI/Investment firm license assistance

• CSSF communication and audit preparation

• Compliance officer outsourcing

• IT security and AML documentation

• Post-licensing reporting and support

Get in touch to launch your regulated crypto business in Luxembourg.