German Ministry of Finance Presents Paper on Blockchain Securities Regulation

News and Analysis

A paper on the regulation of blockchain-based securities has been published by the German Federal Ministry of Finance. In this document, the regulator discusses the introduction of regulations for electronic securities and the issuance of crypto tokens, defining the key points on the issue.

According to the announcement on March, 8, the paper stipulates that the regulation of electronic securities should be technology-neutral, which means that they could be based on blockchain, or distributed ledger technology (DLT).

Notably, the issuance of crypto tokens will not be subject to existing market regulations since crypto tokens do not represent securities, investment or other financial instruments according to the Securities Trading Act. However, initial coin offering (ICO) of crypto tokens is put up for discussion in the paper as investing in crypto tokens purportedly poses risks for investors.

The announcements also reads that, before proposing a draft bill on the subject, the Federal Ministry of Justice and Consumer Protection and the Federal Ministry of Finance should come up with a comprehensive picture of the measures outlined in the key issues paper. Those measures aim to strengthen the role of Germany as one of the leading fintech countries.

Publication of the paper follows February’s statement by the chief executive body of the German government, the Cabinet of Germany, that the country’s blockchain strategy will be introduced by mid-2019. The Cabinet stated that they will undergo an online consultation process prior to introducing the blockchain strategy.

The strategy is reportedly being prepared by the Ministry of Finance and the Ministry for Economic Affairs and Energy. Other relevant ministries are expected to contribute as well.

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