The German Ministry of Finance has published a paper that covers the regulation of blockchain based securities.
Germany’s justice and finance ministries have mapped out plans to prevent abuses and protect investors while facilitating the potential of the technology that underpins cryptocurrencies, and strengthening Germany’s role in digitalization and financial technology.
The regulation of electronic securities should be technology-neutral, ie the issue of electronic securities should also be possible on Blockchain. Initially, the opening should be limited to electronic bonds. The introduction of the electronic share should not be dealt with at this time.
The government has said that the initiative should start with electronic bonds and then move to digital shares. The ministry states:
“In view of the fact that the technical standards and requirements can change rapidly, authorization should be provided to regulate the specific technical details by legal regulation.”
As part of ICOs, tokens have been offered to a significant extent in recent years, which generally 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. Simultaneously, investing in cryptos poses risks for investors. Regarding this, the key issues paper said:
“The national regulatory requirement for crypto-tokens in the field of money laundering prevention, which results from the Amending Directive to the 4th Money Laundering Directive ( EU ) 2018/843 of 30 May 2018, is not the subject of this consultation paper but is part of a transposition law on the Money Laundering Directive addressed separately.”
One central question that still needed to be solved was how to protect purchasers of blockchain-based digital bonds, the ministries said. They offered several alternatives, including limiting the purchase of such instruments to institutional – not private – investors.