Luxembourg crypto-assets market shows promise despite headwinds

Luxembourg’s position as a crypto asset management jurisdiction has improved, according to the second edition of the Crypto-Assets Management Survey.

The survey commissioned by the Luxembourg House of Financial Technology (LHOFT) and supported by the Association of the Luxembourg Fund Industry (Alfi), conducted in Q1 2023 with 127 industry practitioners participating, revealed the state of the crypto assets market in the Grand Duchy.

Despite a challenging year for crypto assets globally, the survey highlights that Luxembourg’s financial centre remains optimistic about the potential of this emerging asset class. Key findings include:

  1. Market perception: Respondents view Luxembourg as being aligned with leading financial centres in Europe for crypto asset management, surpassing both the UK and France in the survey’s rankings.
  2. Importance of crypto-assets: An overwhelming 82% of respondents consider it important for Luxembourg to take a more active stance in the broader crypto-assets space.
  3. Investment Potential: While enthusiasm has slightly diminished, almost a quarter of respondents (24%) still see high potential in crypto assets from an investment strategy perspective, while 34% see some potential. However, an increasing number of respondents (42%) do not find any investment rationale for crypto assets.
  4. Constraints to adoption: The main challenges to the broader adoption of crypto assets in Luxembourg are the lack of maturity in market infrastructure, concerns about high volatility (cited by 82% of respondents), and perceived anti-money laundering risks associated with the asset class.
  5. Regulatory landscape: One-third of respondents (33%) view regulations such as the Markets in Crypto Assets (MiCA) EU Regulation as a critical prerequisite for the industry’s development.

Despite the hurdles, the survey indicates that 39% of respondents believe the global crypto assets market is still in its early stages and holds significant potential, while 33% see it reaching an inflexion point towards broader adoption and maturity.

Moreover, 71% of respondents consider crypto assets to be somewhat to extremely important for the future of asset management in Luxembourg.

Nasir Zubairi, CEO of the LHoFT Foundation, expressed enthusiasm: “The findings of our Crypto-Assets Management Survey reveal that Luxembourg’s financial centre remains open to and opportunistic with innovation. I am invigorated by the evolving perceptions and the potential for developments in relation to crypto-assets in Luxembourg.”

Gildas Blanchard, head of industry affairs at ALFI, emphasized the importance of market analysis, said, “Taking the pulse of the market is critical to define our perspective and an agenda that is fit for purpose in the crypto asset field. We are enthusiastic about what is to come and ready to play our role.”

The full report can be read here

© 2023 funds europe

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