There are several reasons why Luxembourg is a popular choice for establishing a CASp (Cryptocurrency Asset Service Provider):

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Regulatory Framework: Luxembourg has a well-established regulatory framework for cryptocurrency businesses. The country has implemented the 5th Anti-Money Laundering (AML) Directive, which provides a clear and comprehensive legal framework for cryptocurrency asset service providers (Directive (EU) 2018/843 ).


EU Passport Article 59 (7) : "Crypto-asset service providers shall be allowed to provide crypto-asset services throughout the
Union, either through the right of establishment, including through a branch, or through the
freedom to provide services. Crypto-asset service providers that provide crypto-asset services on a
cross-border basis shall not be required to have a physical presence in the territory of a host
Member State." Luxembourg is a member of the European Union, which allows CASp's established in Luxembourg to benefit from the EU passporting regime. This means that they can provide their services to customers across the EU without the need for separate authorization in each member state. 


Strong Financial Sector: Luxembourg has a strong and well-established financial sector, with a number of leading banks and financial institutions based in the country. This provides a solid foundation for CASp's to build partnerships and collaborations with traditional financial institutions.


Digital Infrastructure: Luxembourg has a highly developed digital infrastructure, with a number of data centers and connectivity options available. This provides CASp's with the necessary infrastructure to support their operations and ensure high levels of security and reliability.


Tax Environment: Luxembourg offers a favorable tax environment for CASp's, with a number of tax incentives and benefits available. For example, profits from cryptocurrency transactions are not subject to tax in Luxembourg, and there is no withholding tax on dividends paid to non-resident shareholders.


Skilled Workforce: Luxembourg has a highly skilled and educated workforce, with a strong pool of talent in areas such as finance, technology, and law. This provides CASp's with access to a skilled workforce to support their operations and growth.


Supportive Government: The Luxembourg government has been actively promoting the development of the cryptocurrency industry, with a number of initiatives and programs in place to support CASp's. For example, the government has established a regulatory sandbox for cryptocurrency businesses, which allows them to test and develop new products and services in a controlled environment.



 

Overall, Luxembourg offers a unique combination of regulatory clarity, access to the EU market, strong financial sector, digital infrastructure, favorable tax environment, skilled workforce, and supportive government, which makes it an attractive location for CASp's.