In its coalition agreement of 12 March 2018, the German government set out plans to strengthen Germany’s role as one of the world’s leading digital technology and fintech locations and develop a blockchain strategy. The key-issues paper that has now been produced will contribute to achieving these goals. The paper deals with the possibility of introducing electronic securities and regulating the issuance of crypto tokens.
Introduction of electronic debt securities
German legislation will be opened up to electronic securities. In other words, the current rule whereby securities must be represented by physical certificates in paper form will no longer apply across the board. Regulation of electronic securities will be technologically neutral, meaning that it will be possible to issue electronic securities on blockchain or distributed ledger technologies (DLT). To begin with, the change will be restricted to electronic debt securities. The introduction of electronic shares will not be addressed at this point in time, as the regulatory effort involved would make it impossible to introduce electronic securities in a timely manner.
Regulation of Initial Coin Offerings
In recent years, large numbers of crypto tokens have been issued through Initial Coin Offerings (ICOs). As a rule, these crypto tokens do not constitute securities, capital investments or other financial instruments as defined in the Securities Trading Act (Wertpapierhandelsgesetz). This means that, in contrast to the future issuance of electronic securities, the issuance of such tokens is not subject to existing capital market rules. Nevertheless, crypto tokens pose certain risks for investors. Against this background, the key-issues paper addresses the possibility of regulating public offers of such tokens.
The consultation paper does not address the need for national rules to prevent money laundering in connection with crypto tokens of all kinds on the basis of the Directive amending the Fourth EU Anti-Money Laundering Directive (EU) 2018/843 of 30 May 2018. That matter is dealt with separately in the legislation implementing the Anti-Money Laundering Directive.
The Federal Ministry of Justice and Consumer Protection and the Federal Ministry of Finance want to comprehensively assess the measures set out in the key-issues paper. Based on the results, they plan to produce a ministry draft of a law.
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