2021 was an outstanding year for crypto-assets: Bitcoin reached a historic market capitalisation threshold, the NFT market skyrocketed, and for the first time Bitcoin was adopted as legal tender by a sovereign nation. On the other hand: China has banned crypto-assets, there are concerns on the systemic risks they pose, and many have voiced concerns regarding the sustainability and transparency of this new asset class, not to mention its high volatility.

Against this dynamic backdrop, we are delighted to publish the first-ever market study of Luxembourg’s crypto-assets industry. A joint initiative between LHoFT and PwC Luxembourg, with the active support of ALFI, the aim of this report is to shed light on this fascinating new sector of financial services, by highlighting the drivers of growth, the opportunities arising and the challenges and issues that prevail to help Luxembourg market participants in their decisions on how to approach the asset class.

In light of our findings, we have formulated some recommendations that may ultimately serve to enhance and clarify the Luxembourg financial sector’s positioning towards crypto-assets in the context of rapidly growing interest from investors and international competition to capture early and sustained market share.

Crypto-assets today: an exponential adoption

Despite representing a relatively nascent asset class, crypto-assets have undergone an incredible transformation since the emergence of bitcoin in 2008 - evolving from a niche market primarily consisting of IT-savvy early adopters, to a global phenomenon to the tune of 3 trillion dollars for crypto-currencies, as of November 2021.

Luxembourg’s financial services landscape and Crypto-assets: a cautious optimism

Luxembourg is a perfect microcosm of the global financial services landscape, domiciling the entire spectrum of the fund industry. In light of this, setting up a survey of Luxembourg financial sector participants represents the perfect opportunity to paint an accurate picture of the key challenges and opportunities faced by the sector in regard to crypto-assets; which will in turn help readers gauge the current and future direction of this innovative and disruptive asset class.

Overall, the survey results indicate a mix of enthusiasm and pragmatism around crypto-assets within Luxembourg’s financial services landscape: 61% of our respondents are already assessing, developing or providing crypto-asset products/services.

Link to the survey here.

Source : PwC Luxembourg