- Germany’s Federal Ministry of Justice and Consumer Protection (BMJV) has introduced a bill proposing to digitize securities using blockchain.
- The law aims to provide greater clarity on the role of regulators in a blockchain-driven industry.
The Federal Ministry of Justice and Consumer Protection (BMJV), together with the Ministry of Finance, has announced the publication of a draft law to promote blockchain technology. The draft law provides for the introduction of electronic securities. The Federal Government is thus taking an important step in its blockchain strategy, as stated in the official announcement:
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.
Germany seeks to remain at the forefront of blockchain innovation
The current German law requires that securities be securitized in a document. Once this is achieved, a certificate of value is issued that functions as a contact point for transferable facts under the German property law. In this way, the law ensures that there is “traffic protection” for potential buyers of the security.
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.
The proposal will also create greater clarity on the role of the Federal Financial Supervisory Authority. According to the proposal, the regulator will be in charge of “monitoring the issuance and maintaining the decentralization” of the registration of securities as a new financial service, in accordance with the banking law and the regulation of the central securities depository.
Another important classification was set out in the announcement. The law will make a distinction, for the benefit of consumers, between keeping electronic security registered by a central depository and keeping of registers for the issuance of electronic bonds.
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.
