Crypto Compliance/
Virtual Asset Compliance

Crypto assets/virtual assets have seen exponential growth over the last few years and have generated a strong interest as a potential new asset class for investment fund managers.

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Engaging in activities relating to virtual assets such as tokens, cryptocurrencies or e-wallets raises numerous questions from professionals under the supervision of the Luxembourg regulatory authorities as to their opportunities and concrete possibilities.  

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Embracing the challenges raised by innovative asset classes such as crypto assets, the CSSF and has committed to promote an open, technology neutral and prudent risk-based regulatory approach.

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Activities involving virtual assets entail specific risks pertaining to their volatility, liquidity, technological risk, counterparty, custody or even reputation. Any entity under the supervision of  a regulator (CSSF or AED) interested in pursuing an activity involving crypto assets bears the responsibility to carry out a thorough due diligence and to carefully weigh up the risks and benefits associated with the proposed assets. Also unregulated entities should have an interest in having a solid AML/CFT framework in relation to cryptocurrencies, aligning themselves to a best practice approach recognised by the regulators.

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Internal governance must ensure sound and prudent management of all the fund’s activities including a clearly defined risk-taking process and risk appetite assessment.

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Each authorised Investment Fund Manager (“IFM”) intending to manage an alternative investment fund, regulated or not, investing in virtual assets, must also obtain prior authorisation from the CSSF for such a strategy.