Earlier this week, Germany’s Federal Ministry of Finance (BMF), along with the Federal Ministry of Justice and Consumer Protection (BMJV), introduced a draft bill on blockchain-based digital securities. The bill stated that the adoption of digital securities is one of the core aspects of the German government’s blockchain strategy.
“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,” an official summary of the draft bill declared.
Regulatory Clarity and Monitoring
Current legislation in Germany states that financial instruments that are classified as securities must be secured in a document. Therefore, blockchain technology could help to guarantee liquidity by providing a digital replacement for paper certificates.
Furthermore, the draft bill improves the clarity of regulation on digital securities: specifically, “the draft differentiates between the keeping of a central electronic securities register by a central securities depository and the keeping of registers for issuing electronic bonds made possible by distributed ledger technologies,” says a statement summarizing the draft bill. (Translated quote.)
The draft bill also declares that the Federal Financial Supervisory Authority (BaFin) will serve as an important regulator in the field of blockchain-based e-stocks. Additionally, BaFin will be responsible for monitoring the issuance of digitized securities, as well as the maintenance of decentralized ledgers.
Digital Securities Seem to Be Gaining International Popularity
Germany may be the latest example in a growing international trend toward digital securities.
For example, CoinTelegraph reported that Tokai Tokyo Financial Holdings, which is a major institution in Japan’s traditional financial world, announced plans to launch a digital security exchange in the country. The company also reportedly has plans to explore digital security issuance.
Additionally, in July, a US-based company known as Arca Labs launched its Ethereum trading network for a fund that was mainly comprised of US Treasury security shares.