Inhalberschuldverschreibungen<\/em>) and certain electronic fund share certificates. The German electronic securities act is crucial for institutions looking to utilize blockchain tokenization for the issuance and management of electronic securities. It is widely believed that the new law will pave the way to widespread changes in capital markets, including greater issuance, settlement, and asset transfer efficiencies. <\/p>\n\n\n\nWhat does the german electronic securities act (eWpG) consist of? In addition to providing a broad understanding of this newly introduced law, this article will shed light on key elements of the eWpG.<\/p>\n\n\n\n
What\u2019s new?<\/h2>\n\n\n\n
The act\u2019s goal is for electronic securities to carry the same rights and obligations as physical, certificate-based securities, which fall under the Principle of Technological Neutrality as adopted in Germany. This means that crypto-securities are considered securities under the German Custody Act (Depotgesetz<\/em>) and can only be held for third parties by a bank with a custody license or a CSD. In other words, the crypto custody license mentioned above is not sufficient to safekeep crypto securities or so-called security tokens but only non-security crypto assets.<\/p>\n\n\n\nConsequently, a new form of financial service has been created: Crypto Securities Registry Management (Kryptoregisterf\u00fchrende Stelle<\/em>); this service can only be provided by qualifying financial institutions under the German Banking Act.<\/p>\n\n\n\nAs per section 1 of the German Electronic Securities Act, the eWpG applies to mainstream bonds (Inhaberschuldverschreibungen<\/em>) and certain electronic fund share certificates. It does not yet cover the issuance of company shares, stock, or real estate. However, some forms of equity can be tokenized. All payment proposals must be assigned to the owner of the electronic security (Elektronisches Wertpapier) as the eWpG establishes bonds as crypto securities. Therefore the right of receiving any payment documented in the bond certificate\/token follows the right to possess the token. Thus, all payments must be completed to the owner of that electronic security. <\/p>\n\n\n\nThe act also defines electronic securities as security without a certificate. The issuance of electronic securities is completed through entry into an electronic securities register instead of issuing a (physical) securities certificate.<\/p>\n\n\n\n
It also differentiates between Centrally Registered Securities (Zentralregisterwertpapiere) and Crypto Securities (Kryptowertpapiere):<\/p>\n\n\n\n