3FOOD

Third Industrial Revolution Consulting Group
blockchain. 259 This suggests Luxembourg’s biggest industry may be vulnerable to the reality
taking hold around it. But it can seize an opportunity if it incentivizes its fund-management
industry to move faster than those in other financial centers. In a world of open data, where
transactions and value exchanges of all sizes flow fluidly across borders and disparate
jurisdictions -- as well as across and between humans and “Internet of Things”-connected
devices -- many of these initiatives will demand distributed trust. Any embrace of “robo”
financial advice, by way of example, will require that investment algorithms are subject to realtime
audits which can be enabled by the Blockchain’s immutable record of changes of state.
That same tamper-proof ledger can also record and prove people’s self-sovereign assertions of
identity, the bedrock of the ambitious data vault project aimed at facilitating seamless, digital
execution of citizens’ personal and property rights.
The blockchain allows the issuance of the unique digital assets and crypto-securities, turning
crowdfunding schemes into liquid marketplaces for new capital formation. It’s also an
interactive accounting platform with which government agencies and/or private institutions
can issue local B2B and B2C currencies to boost the internal economy in a manner that assures
users that their counterparts won’t renege on credit obligations. And it must feature heavily in
any green finance plan to fund energy projects at home or abroad, both because the blockchain
offers auditability of key data on carbon savings and because it allows for financial aggregation
and securitization of small, decentralized community installations.
Regulation can be both the killer and the enabler of innovation in this field. With that in mind,
Luxembourg’s government should approach it as it has other such opportunities, seizing on
regulatory innovation and reform opportunities to encourage new technologies and markets.
The Grand Duchy’s dominance in asset management and banking demonstrates how this
approach can let it carve out an international role and foster a high-value-add, wealthgenerating
export industry. This was seen in its proactive adoption of the first UCITS directive of
1985, which turned Luxembourg into the second-largest fund management center in the world
and, more recently, in its move to encourage family offices to domicile in the country. The
country now has an opportunity to do the same again as early-stage regulatory guidelines
emerge around the blockchain and virtual currencies. Luxembourg has already moved quickly
to grant licenses under the EU’s new “BitLicense” rules to firms such as payments provider
SnapSwap and bitcoin exchange BitStamp. Service providers such as bitcoin wallet and analytics
firm Blockchain -- which adopted the name of the ledger as its own -- have been so encouraged
by this approach that they set up headquarters in Luxembourg.
259 KPMG, “Management Company CEO Survey 2016,” p. 6.
http://www.kpmg.com/LU/en/IssuesAndInsights/Articlespublications/Documents/Management-Company-CEO-
Survey-032016.pdf
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