Blockchain Securities Regulation Proposed By German Finance Ministry

The German Federal Ministry of Finance has published a key issues paper that discusses the introduction of blockchain-based securities and the regulation of the public offering of certain crypto assets.

The aim of the paper is to make a contribution to achieving the goal of the Federal Republic of Germany of becoming one of the leading digitization and FinTech locations. To this end, the paper said that the regulation of electronic securities should be technology-neutral, which means that electronic securities should also be possible on blockchain or Distributed Ledger Technology (DLT).

“The opening is initially limited to electronic debt securities,” the paper said. “The introduction of the electronic share should not be dealt with at this time. The regulatory burden that would be necessary would preclude a timely introduction of the electronic security.”

Regarding the public offering of crypto tokens, the paper said that crypto tokens do not constitute securities, investments or other financial instruments within the meaning of the Securities Trading Act. As a result, the issuance of these tokens will not be subject to existing capital market regulations. The ministry, however, has put the regulation of the public offer of these tokens up for discussion in the paper as investing in crypto tokens purportedly poses risks for investors.

“The Federal Ministry of Justice and Consumer Protection and the Federal Ministry of Finance want to get a comprehensive picture of the measures outlined in the Key Issues Paper in order to draw up a draft bill on this basis,” the paper said.

Last month, the government of Germany opened a consultation process to explore how to deploy blockchain technology across various industries. It invited companies and industry groups to supply recommendations to formulate a comprehensive blockchain strategy by the summer.

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