Luxembourg’s National Risk Assessment on Virtual Asset Service Providers
In its 2025 National Risk Assessment (NRA), Luxembourg has labeled virtual asset service providers (VASPs) as high-risk regarding potential money laundering activities. This classification stems from ongoing concerns about the crypto sector’s vulnerability to financial crimes. The report has indicated that VASPs present a significant risk profile, primarily influenced by their transaction volumes, client demographics, distribution methods, legal frameworks, and the global nature of their operations.
Historical Context and Escalating Concerns
The risk associated with VASPs was initially flagged as a growing concern in the nation’s 2020 report, which analyzed the inherent money laundering risks connected to virtual assets. Subsequently, a report published in 2022 escalated these concerns, categorizing the risks tied to cryptocurrencies and virtual currencies as extremely high. Significant reasons for this classification include the digital-first and cross-border features of these assets.
Regulatory Initiatives in the EU
As a member of the European Union, Luxembourg is at the forefront of the EU’s initiatives to implement regulations within the cryptocurrency sector. The forthcoming Markets in Crypto-Assets (MiCA) framework seeks to create a cohesive regulatory landscape across all 27 EU nations. Since the beginning of this year, various crypto asset service providers have begun securing licenses to legally function within the EU. For instance, Kraken launched regulated derivatives trading, and Crypto.com obtained a similar license to enhance its offerings.
Furthermore, the MiCA framework introduces new compliance requirements specifically for stablecoins. Notably, Tether, the organization behind the leading stablecoin USDt (USDT), has opted not to adhere to the new regulations, leading to its delisting from several top European platforms, including Crypto.com, Coinbase, and Binance.
Law Enforcement Efforts Against Money Laundering
The growing association between cryptocurrencies and money laundering activities is influencing law enforcement efforts across the globe. Recently, authorities in Hong Kong arrested a dozen individuals linked to a cross-border money laundering operation that utilized cryptocurrency and over 500 dubious bank accounts to launder an impressive 118 million Hong Kong dollars, equivalent to approximately $15 million.
Additionally, European police apprehended 17 people in connection with what has been dubbed the “mafia crypto bank,” suspected of laundering more than 21 million euros (around $23.5 million) for criminal entities operating in the Middle East and China. From this crackdown, law enforcement seized assets totaling 4.5 million euros, including cash, cryptocurrencies, 18 vehicles, four shotguns, and multiple electronic devices.
