On 31 December 2024, the Luxembourg law of 20 December 2024, which amends the current legislative framework governing dematerialised securities (referred to as the Blockchain IV Act), came into effect. To provide context, the dematerialization of securities involves transitioning from physical stock certificates to electronic records. This process entails retiring physical certificates from circulation in exchange for electronic documentation. Subsequently, securities are transferred between accounts through book transfers. Although Luxembourg's existing framework addressed some previously established technologies, the primary aim of the Blockchain IV Act amendments is to integrate emerging technologies, especially distributed ledger technology (DLT), into the financial sector, thereby improving legal security and operational efficiency. The Blockchain IV Act introduces a new entity termed a “control agent, ” which can oversee the issuance of dematerialized securities via DLT, offering an alternative to the conventional model that depends on a central account keeper and a custody chain. The responsibilities of the control agent include managing the issuance account, monitoring the chain of custody of dematerialized securities (while allowing actual securities accounts to be held with various custodians, independent of the control agent), and ensuring accurate reconciliation of issued securities with those held in accounts by the relevant custodians.

In contrast, the traditional central account keeper maintains the issuance account and occupies a central role in the custody chain. This novel model is optional for issuers and is designed to provide greater flexibility, security, and transparency for both issuers and investors. The amendments also aim to bolster Luxembourg’s status as a premier financial center within the European Union (EU) for DLT applications in unlisted debt and equity securities issuances. Beginning in 2019, Luxembourg has implemented a series of revisions to its legal framework, facilitating the use of DLT for financial instruments and recognizing DLT-issued financial instruments as equivalent to traditional ones across an expanding range of areas. Eligible to act as control agents are any credit institutions (such as chartered banks) or investment firms based in Luxembourg or any other EU member state, as well as operators of Luxembourg’s security settlement systems. The supervisory authority for the Luxembourg financial sector is responsible for ensuring that control agents comply with the new legal standards. In summary, the Blockchain IV Act seeks to modernize Luxembourg's legal framework for securities by harnessing DLT and additional technological innovations, thus enhancing the sector's competitiveness and appeal while ensuring strong legal protections for market participants.