Luxembourg has taken a new step in modernizing its sovereign debt with the issuance of fully digital treasury certificates based on blockchain technology. Limited to 50 million euro, the transaction of these six-month zero-coupon notes may seem like a mere test. Comments from Bob Kieffer, secretary general of Luxembourg’s treasury, suggest a far more structured strategy.
“We’re not doing this for show. This format is meant to be reused. Other instruments will follow,” Kieffer told Investment Officer, without providing details on upcoming products. This deliberate vagueness doesn’t hide the core message: the technical, legal, and operational framework is ready to be redeployed in the short term.
When the certificates were announced in June, the Grand Duchy’s finance minister Gilles Roth claimed to be the first country to issue such digital treasury certificates at this scale. “We are committed to staying at the forefront of digital asset innovation,” Roth said. “I will continue to ensure that the global financial industry finds a conducive environment in Luxembourg for the tokenization of assets and investment vehicles.”
All in Luxembourg
The issuance relies entirely on infrastructure located in Luxembourg. The securities were issued under Luxembourg law, listed on the Luxembourg Stock Exchange, and structured via the Orion platform developed by HSBC, also based in the country. Two banks – HSBC and BGL BNP Paribas – acted as lead managers to ensure market-standard execution, while also highlighting local expertise.
According to Kieffer, the goal was to “concretely demonstrate that digital finance can be structured locally using existing tools,” within a robust legal framework.
This digital certificate is based on distributed ledger technology (DLT), meaning the entire life cycle of the bond – issuance, distribution, settlement – takes place on the blockchain. Unlike traditional dematerialized securities, which still rely on offline processes or multiple platforms, the DLT certificate operates in a single environment.
“It allows us to ensure absolute transparency and traceability at every step,” Kieffer said.
Another benefit is speed: the time between issuance and settlement was reduced from five to three days. The Treasury is even considering aiming for same-day (T+0) settlement in the future, once a digital euro or central bank settlement currency becomes available.
A trial phase
One major point of differentiation is the requirement for investors to register on the Orion platform. This is no trivial constraint. It enables better distribution tracking and enhances both legal and operational security. This clearly sets the Luxembourg issuance apart from other European initiatives, such as Slovenia’s, which relied on a private placement via a single banking partner.
“We chose a different approach. Our goal was to highlight the full range of expertise within Luxembourg’s financial ecosystem,” Kieffer said.
The investor base was not radically different from traditional placements. Most subscribers were European institutional investors: banks, insurers, asset managers. But according to the Treasury, they had an added motivation: “These investors are also considering using this technology as future issuers. They’re testing both the product and the process.”
This educational aspect appears to be fully integrated into the broader strategy.
The preparation phase was long, especially from a legal standpoint. Developing a contractual framework suitable for a DLT-based issuance took several months. However, once that framework was established, execution was swift.
“If we had to launch a second issuance tomorrow, it would be entirely feasible,” said Kieffer.
The message is clear: the goal was not just to innovate, but to create a replicable, long-term solution aligned with international standards.
Gradual transformation
This first issuance is not intended to replace traditional formats immediately. Luxembourg will continue to use conventional tools to meet its financing needs. However, the digital model is now a credible alternative. In the medium term, its development will depend largely on the European context, particularly the implementation of the digital euro. This could enable better integration with the European Central Bank’s monetary policy mechanisms as well as instant settlement.
The Luxembourg Treasury remains cautious. By investing in a still-emerging technology, it is anticipating a gradual transformation of the sovereign debt market.
“It is our responsibility to keep up with technological developments, not only to improve our efficiency but also to avoid being caught off guard when these technologies become the norm,” Kieffer said.