Agefi Luxembourg - novembre 2025

Novembre 2025 19 AGEFI Luxembourg Fonds d’investissement By Simon RECHER, Counsel Investment Funds & Dounia BELKADI, Associate Investment Funds, Dentons C rypto-assets and tokenised ins- truments have moved from niche experimentation to an established segment of the alternative investment universe, attracting both institutional investors and private investors. With frameworks such as the Markets in Crypto-As- sets Regulation (“MiCA”) and the Distri- buted Ledger Technology Pilot Regime (“DLT Pilot Regime”) entering into force, Luxembourg, as a leading European fund hub, stands at the forefront of this shift. This development requires digital finance operations tobetransposedintotraditionalfunddocumentation whichmust now address concepts such as e-money issuance,digitalwallets,DLT-basedsecurities,andon- chain custody. Yet, the Alternative Investment Fund Managers Directive (“ AIFMD ”) - the cornerstone of EUalternativefundregulation-designedforalinear, account-basedfinancial world, presupposes tangible assets, identifiable issuers, andcentralised intermedi- aries. For fund sponsors, depositaries and advisors, thechallengeistoensurecompliancewhileaccurately reflectingdigital structures in funddocumentation. This analysis explores two core issues: (I) the applica- tion of diversification rules to tokenised and crypto- assets, and (II) the redefinition of cash and custody undertheAIFMDinlightofe-moneyandDLT-based holdings. I. The diversification rule in tokenised and crypto alternative investment funds: the “Issuer” question Luxembourg alternative investment funds (“ AIFs ”) may be structured under product laws – “Part II” Funds,SpecialisedInvestmentFunds(“ SIFs ”),Invest- ment Companies in Risk Capital (“ SICARs ”) or Re- servedAlternative Investment Funds (“ RAIFs ”) - or as unregulatedAIFs under company law. The flexi- bilityof theRAIFand the société en commandite spéciale (“ SCSp ”)havemadethesevehiclesapreferredchoice forsponsorsseekingrapidtime-to-marketwithmulti- compartment options. PartIIFunds,SIFsandRAIFs(exceptRAIFsinvesting in risk capital) are subject to risk-spreading require- ments limiting exposure to a single issuer or asset to 20% (Part II) or 30% (SIF/RAIF not investing in risk capital). While unregulated AIFs are not bound by such ratios,manyadopt similardiversification for in- vestor protection. Circular 07/309, issued by the Commission de Surveil- lanceduSecteurFinancier (“ CSSF ”),providesthataSIF (andby extension, aRAIF)maynot investmore than 30%of its assets in securities of the same type issued by the same issuer, a rule applied mutatis mutandis to other asset classeswith temporarybreaches tolerated duringramp-upordivestment.Appliedtocrypto-as- sets, no single cryptocurrency or tokenised asset shouldexceed30%ofthefund’snetassets.TheEuro- peanSecuritiesandMarketsAuthority(“ ESMA ”)re- port on trends, risks and vulnerabilities and the DLT PilotRegimeconfirmthatDLT-basedinstrumentsre- main subject to traditional diversification principles. The 30%cap reflects aprudential goal: avoiding con- centration in a single economic exposure. Digitalisa- tion, however, complicates the concept of “issuer”. UnderEUfinancialregulation,“issuer”designatesthe legal person issuing a security. In decentralised sys- tems, this definition cannot be appliedmechanically. Cryptocurrencies have no identifiable issuer, only a decentralised network (e.g., Bitcoin, Ethereum) vali- datingandrecordingtransactions.Theseassetsarenot “issued” within the meaning of securities law. To- kenised assets have multiple potential “issuers”: (a) the special purpose vehicle responsible for tokenisa- tion, (b) the smart contract, or (c) the DLT network maintaining records of ownership. None of the AIFMD II, which harmonises rules for loan-originat- ingAIFsandstrengthensthedelegationandinvestor- protectionstandardsunderAIFMDorMiCAclarifies how diversification applies in such assets, leaving practitionerstointerprettherulebyanalogywithtra- ditional principles. Practitioners have shown a pragmaticwillingness to apply diversification in a substance-over-formman- ner by focusing on economic correlation rather than formal issuer identity. For cryptocurrencies, the blockchainnetworkistreatedasthe“issuer”,making all coins on the same network correlated exposures. For tokenised securities, the underlying legal entity remainsthe“issuer.”Fortokenisedrealassets,diver- sification is assessed at the level of the underlying obligori.e.theborrower,property,orprojecttowhich the tokenised instrument relates. A parallel exists in theETF context, though in reverse: index-trackingor derivative-based ETFs apply a look-through to eco- nomic exposure rather than to the technical issuer. In bothcases,theobjectiveistoaligndiversificationwith the true concentration risk. Fund documentation should therefore define “is- suer” for diversification purposes where crypto-as- sets or tokenised instruments form part of the investment policy. II. Reframing cash and custody in tokenized and crypto funds The “e-moneybridge” solution The digitalisation of fund operations, from tokenised units to on-chain set- tlement, confronts Luxembourg’s fundindustrywiththelimitsofex- isting custody and cash rules. Onedebatedarea is the applica- tion of Article 19(7) of the Lux- embourgLawof12July2013on Alternative Investment Fund Managers ( “ AIFM Law ” ), which governs the holding of AIF cash by depositaries, and how these requirements interact with the emergence of e-money- based crypto trading structures. Article 19(7) AIFM Law, which transposes Article 21(7)oftheAIFMD,requiresallAIFcashtobeheldin accountswithacentralbank,anEUcreditinstitution, or a third-country bank of equivalent standing. The CSSF’s press release of 18 October 2022 onAIF cash accounts,reaffirmedthat“onlyentitieswithabanking license”mayholdAIFcash.Electronicmoneyinstitu- tions (“ EMIs ”), even if authorised under the Law of 10November 2009 onpayment services, are thus ex- cluded. Depositaries must ensure ongoing compli- ance by all parties involved in cash monitoring and custody(Article21(4)(b)AIFMDandArticles91–92of theAIFMDLevel 2Regulation). AIFs investing in digital assets often rely on service providerscombiningseveralregulatedfunctions:ali- censedEMI providing e-wallet services andaVirtual Asset Service Provider (“ VASP ”) or Crypto-Asset Service Provider (“ CASP ”) for crypto trading and custody.Operationally,thedepositarywouldneedto transfer fiat funds to the EMI, which converts it into e-money credited to the AIF’s wallet for immediate investment. However, EMIs are not authorised to “holdAIF cash” as they lack a banking license. This reflects the letter of Article 19(7). While an EMI may issue e-money, it cannot hold cashpending issuance. ToremainalignedwiththeAIFMLaw,the “ e-money bridge ” solutionemerged,whereby(i)thedepositary transferscashtoanomnibusaccountwithabanking- licensed cash agent of the EMI; (ii) upon receipt, the EMIimmediatelyissuese-moneytotheAIF,credited to its e-wallet and (iii) the e-money is immediately used to acquire crypto-assets without any cash ever being “held” with the EMI. The transaction may be characterized as a “payment”, not a deposit, thereby avoidingabreachofArticle19(7),whilethedepositary retains oversight bymonitoring the cash transfer and the issuance of e-money. The market interpreted the CSSF’s 2022 guidance as applying only to “cash” (underEURegulation2018/1672)andnottoe-money, viewing issuance as a payment transaction outside Article 19(7). While this interpretation provides operational flexi- bility, it raises several issues requiring disclosure and contractual safeguards: (i) whether acquisition and temporary holding of e-money, as an intermediate steptocrypto-assetinvestment,alignswiththefund’s investmentpolicy,(ii)whetherfutureregulatoryclar- ificationmayclassifye-moneyas“cash”,and(iii)how todelineate thedepositary’s reliance onEMIs/VASPs without expanding its restitution liabilityunderArti- cle 21(8)(a)AIFMD. Many depositaries now include explicit carve-outs, permittingrefusalordiscontinuationofcrypto-related safekeeping if it alters their operational model or risk profile. The “e-money bridge” reflects how Luxem- bourgdepositariesareadaptingtotheevolvinginter- play between AIFMD II, the Markets in Financial InstrumentsDirective II (“ MiFIDII ”) andMiCA. Tokenisation also challenges the AIFMD custody framework, requiring clear transcription into fund documentation Custodyof tokenisedassets: towards a layered cus- todymodel UnderAIFMD,depositarydutiesrestonabinarydis- tinction: (i) financial instruments that can be “ held in custody ” must be physically delivered or registered intheAIF’snameand(ii)all “ otherassets ” aresubject to verification and recordkeeping. This framework presupposesalinearaccount-basedcustodychain(is- suer → CentralSecuritiesDepository(“ CSD ”) → sub- custodian → depositary → fund) and a concept of “possession.” However,tokenisedinstrumentsrecordedonDLTdo not fit this model; they exist as digital records linked topublic/privatekeys,withownershipdefinedbythe control of thesekeys. Such instruments qualifyas “fi- nancialinstruments”underMiFIDII,yettheycannot be “held” traditionally in an account. If classified as “financial instruments,” depositaries cannot techni- callymeet their safekeepingduties because they can- notholdprivatekeys;iftreatedas“otherassets,”strict liability under Article 21(12) AIFMD falls away, therebyreducinginvestorprotection.Thisunresolved classificationcreatesuncertaintyforliabilityallocation and for drafting custody-relateddisclosures. Luxembourg’s new blockchain law of 19 December 2024 (“ Blockchain Law IV ”) completes the national DLTframeworkandintroducestheDLTsecuritiesis- suanceaccount,adigitalequivalentofatraditionalse- curities account. A CSSF-approved control agent reconciles and certifiesDLT records, providingproof of ownership and continuity of control. This enables depositaries to monitor control over digital instru- ments without holding private keys and shifts cus- tody fromphysical possession to functional control. Fund documentation should explicitly identify the control agent responsible for record verification, de- scribe the DLT securities account as functionally equivalenttoatraditionalcustodyaccountandclarify thatthedepositaryretainsoveralloversightandfidu- ciaryresponsibilityunderArticle21AIFMD,delegat- ing only technical functions to licensedproviders. Tokenised funds inLuxembourg thus operateunder a layered custodymodel involving (i) thedepositary, retainingfiduciaryoversightandliability;(ii)thecon- trol agent, reconciling and certifying DLT records under Blockchain Law IV, as a CSD-equivalent; and (iii)theVASPorwalletprovider,safeguardingprivate keys and executing on-chain transactions under MiCA and anti-money laundering and counter-ter- rorism financing requirements. This structure aligns DLT-based assets withAIFMDprinciples while pre- serving legal certainty and investor protection. Crypto assets and tokenisation in Luxembourg Alternative Funds: Translating digital realities into legal frameworks T he Luxembourg Private Eq- uity&VentureCapitalAsso- ciation (LPEA)* successfully concluded another edition of LPEA Insights, held onOctober 23, 2025, at LuxexpoThe Box. This year’s LPEAflagship private capital conference welcomed over 1,200 partici- pants,including145GeneralPartnersand 125 Limited Partners from Luxembourg and abroad — an increase of 41% from the 850 registered in 2024 — confirming its growing relevance as a key meeting point for the private capital community. With 100+ speakers and 29 sessions the event provided a comprehensive plat- form for exchange of ideas, insights, and innovation across all segments of the pri- vatemarkets industry. KeyThemes andTakeaways Under the theme “Pathway to Competi- tiveness,” discussions explored how the industrycontinuestoadapttoglobaleco- nomic, technological, and regulatory shifts. 1. Infrastructure & Private Debt – Still strong pillars of opportunity, evolving with new perspectives for long-term value creation. 2. Democratization & Digitalisation – From asset access to tech enablement, both are reshaping, also together, how capital flows anddecisions aremade. 3. Trust & Relationships – In an ever- changing landscape, strong investor rela- tionships and transparency remain the foundation for sustainable growth of our industry. “The recordparticipation and the quality of discussions this year underline how collaboration and innovation continue to shape our community,” said Stéphane Pesch, CEOof LPEA. APlatformfor Innovation andConnection Building on its legacy of fostering collab- oration,LPEAInsights2025featuredavi- brant PE Tech area showcasing cutting- edgesolutionsfrom18PETechexhibitors, while 22 sponsors contributed to the con- ference’s dynamic agenda and engage- ment spaces. The event once again formed part of the Luxembourg Venture Days, reinforcing the country’s position as a European hub for privatemarkets and innovation. * Created in 2010 by a leading group of private equityandventurecapitalplayersinLuxembourg, withmore than 660members today, LPEAplays a leading role locally actively promoting PE and VC in Luxembourg. LPEA provides a dynamic and interactive plat- formwhich helps investors and advisors to navi- gate through latest trends in the industry. International by nature, the association allows memberstonetwork,exchangeexperience,expand theirknowledgeandgrowprofessionallyattending workshops and trainings held on a regular basis. LPEA is a member of Invest Europe and Luxembourg For Finance LPEA Insights 2025: Luxembourg’s Private Capital Conference Reaches New Heights ©LPEA