Germany’s Federal Ministry of Justice and Consumer Protection (BMJV) has introduced a bill proposing to digitize securities using blockchain.
The requirement for a paper‑based note for issuing securities under the German law has been an obstacle for the use of security tokens in Germany. With the release of a draft bill (the “Bill”) permitting the issuance of electronic bearer bonds under German law, Germany is paving the way for digitalizing its financial markets.
The Bill permits the issuance of securities in electronic form. For the time being, these e-Securities are limited to bearer bonds, but the Bill is designed to permit other forms of securities, such as shares or fund units, to be issued in electronic form going forward.
By introducing a new blockchain-based mechanism for securitization of securities, the German authorities seek to “guarantee the marketability” of financial assets. In addition, the law will ensure compliance in a more effective manner.
With the establishment of digital securities, one of the central components of the Federal Government’s blockchain strategy and the joint key issues paper of the BMF and the BMJV on electronic securities will be implemented.
German regulators are concerned about the advancements that other countries have made with respect to legislation, regulation and implementation of blockchain technology for issuing electronic securities. In this regard, Germany seeks to maintain its attractiveness as a financial center. German authorities emphasize that their main objective is to modernize the existing securities law. In this way, it will be possible to protect the functioning of the financial markets within the country.
As a result, the authorities expect an improvement in the conditions for innovation in the financial sector. The German Ministry of Finance concludes with the following:
The adaptation of the legal framework to new technologies, especially blockchain technology, serves to strengthen Germany as a business location and to increase transparency, market integrity and investor protection.