Luxembourg provides a sophisticated regulatory environment for crypto businesses with strong financial infrastructure. The country offers clear licensing pathways and access to traditional banking services.

Luxembourg implemented EU MiCA regulation and has specific AML requirements for virtual asset service providers (VASPs). The CSSF (financial regulator) oversees crypto activities.

Prior to the full application of the Markets in Crypto-Assets Regulation (MiCAR) on December 30, 2024, crypto businesses were primarily required to register as Virtual Asset Service Providers (VASPs) with the Commission de Surveillance du Secteur Financier (CSSF) under the national law transposing the 5th Anti-Money Laundering Directive (AML/CFT Law). This VASP registration is mandatory for services like exchange between virtual assets and fiat, transfer of virtual assets, custody, and operation of a trading platform. The CSSF's role was limited to AML/CFT supervision. The registration process involves submitting a detailed file, and there is an annual supervisory fee of EUR 15,000. With MiCAR's full application, the VASP registration regime is being replaced by a more comprehensive MiCAR authorisation regime. Any entity professionally providing one or more crypto-asset services (CASPs) must obtain a formal CSSF authorisation (license). This includes services like operating a trading platform, providing custody and administration of crypto-assets, and receiving and transmitting orders. The new MiCAR license is a full authorization, not just a registration, and is subject to stringent requirements on governance, capital, and consumer protection, allowing for passporting across the EU.

Luxembourg does not have a specific, dedicated crypto tax law, but rather applies general income tax principles. For individuals, the tax treatment depends on the holding period and the nature of the activity. Capital gains from the sale of crypto-assets held for more than six months are generally tax-exempt, provided the activity is not considered professional. This long-term holding period exemption makes Luxembourg highly favorable for individual investors. Conversely, gains from assets held for less than six months are considered speculative gains and are taxed as miscellaneous income at the individual's progressive income tax rate, which can be up to 42%. Profits from professional or commercial crypto activities, such as mining or trading as a business, are taxed as commercial income at the ordinary progressive income tax rates. For corporate entities, crypto-assets are treated as intangible assets and are subject to the standard corporate income tax rate (around 24.94% in Luxembourg City, including municipal business tax and contribution to the employment fund). VAT is generally exempt for the exchange of traditional currency for crypto-assets and vice-versa, following the Hedqvist ruling by the European Court of Justice. Luxembourg is also implementing the EU's DAC8 directive, which mandates automatic exchange of information on crypto-asset transactions, with mandatory reporting starting on January 1, 2026.

Luxembourg is generally considered a crypto-friendly jurisdiction, but obtaining banking services for crypto businesses remains a challenge, as is common globally. Traditional banks are often hesitant due to AML/CFT concerns. However, specialized financial institutions and innovative banks are emerging. Swissquote Bank Europe, based in Luxembourg and regulated by the CSSF, is a notable example offering crypto-related services to its clients. Furthermore, the presence of the Sygnum Bank (the world's first regulated digital asset bank) in the broader European market, and Luxembourg's progressive stance, suggests a developing ecosystem. For smaller operations, some local banks like Raiffeisen or Post have been reported by individuals to facilitate transfers to major exchanges, though this is not a formal corporate banking solution. The overall situation is improving, driven by the clear regulatory framework, but still requires specialized engagement.

https://www.cssf.lu/