Crypto-assets: Paradigm shift or short-term trend?

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 post, 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.

Crypto-currency market capitalisation (USD tn)

Cryptocurrency market capitalisation (USD tn)

Sources: CoinGecko; BitInfoCharts

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

When do you expect crypto-assets to become a strategic priority for your business?

When do you expect crypto-assets to become a strategic priority for your business?

Source: PwC Market Research Centre

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.

Next steps

Luxembourg has always been characterised by its agile regulatory environment, positioning its financial markets at the forefront of innovation in a constantly evolving landscape. There are clear opportunities for the country’s authorities to foster a constructive dialogue with all relevant stakeholders, strengthening core competencies, and providing market participants with the support and security they need.

1. Maintain ongoing dialogue with market participants

2. Enhance coordination and cohesion between stakeholders

3. Foster financial literacy through a comprehensive education plan

Recording - Crypto-assets management in Luxembourg - 9 February 2022

Contact us

Dariush Yazdani

Partner, Global AWM Market Research Centre Leader, PwC Luxembourg

Tel: +352 49 48 48 2191

Thomas Campione, CFA

Advisory Director, Blockchain & crypto-assets Leader, PwC Luxembourg

Tel: +352 62133 50 93

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