Germany’s Ministry of Finance published a key issues paper together with the Federal Ministry of Justice and Consumer Protection discussing the introduction of electronic securities and the regulation of public offerings for certain crypto tokens. The measures aim to boost Germany as a digitization and fintech hub and move closer to a regulated blockchain strategy.
There’s a recommendation that German law should be opened up for electronic securities, ie, the currently mandatory documentary embodiment of securities (paper form) should no longer apply without restriction, and the regulation of electronic securities should be technology-neutral, ie, the issue of electronic securities should also be possible on blockchain and distributed ledger technology (DLT).
Initially, the opening should be limited to electronic bonds, not shares, because the necessary regulatory burden would preclude a timely introduction of an electronic security, according to the statement.
On crypto-tokens, the Ministry noted that ICOs have been offered to a significant extent in recent years, which generally do not constitute securities, investments or other financial instruments within the meaning of the country’s Securities Trading Act.
As a result, the issuance of these tokens – unlike the future issue of electronic bonds – will not be subject to existing capital market regulations. At the same time, investing in crypto tokens poses risks for investors. Against this background, the regulation of the public offer of these tokens is put up for discussion in the key issues paper.