In the context of the growing popularity of virtual assets amongst investors throughout Europe, the CSSF published on 4 January 2022 the anticipated FAQ on virtual assets addressed to credit institutions (the "FAQ"). These FAQ followed the recent publication by the CSSF of FAQ on virtual assets addressed to undertakings for collective investment.
The FAQ in a nutshell
In these FAQ, the CSSF clarifies:
- that credit institutions may invest directly in virtual assets (hereafter “VAs”) subject to certain accounting and capital-related considerations;
- that credit institutions may open accounts to deposit VAs (the “VAs Accounts”) similar to securities accounts for the safekeeping of traditional financial instruments, provided that those VAs Accounts are segregated from the credit institutions’ own assets; credit institutions may not open traditional bank accounts in virtual assets nor take deposits in virtual currencies and/or facilitate or execute payment settlements in virtual currencies;
- what registrations/notifications are needed for credit institutions which intend to provide virtual asset services;
- what the expectations of the CSSF are toward credit institutions that use specialised virtual assets exchange and custody platforms, in particular, as regards custody services;
- the CSSF requirements with regard to investor protection in the context of the provision of virtual asset services which in short entails the requirement to set up an investor protection framework keeping investors informed of the underlying risks of holding VAs;
- that credit institutions offering services or being party to transactions in VAs are required to observe the general principles and obligations of sound and prudent banking set out by CSSF Circular 12/552;
- that a Luxembourg fund depository may act as depository for investment funds investing directly in virtual assets subject to compliance with some specific requirements.