Regulators and a Bill on Blockchain-Based Digital Securities

Last week, Germany’s Federal Ministry of Finance and the Federal Ministry of Justice and Consumer Protection introduced a draft bill on blockchain-based digital securities. Importantly, Federal regulators in Germany would like to modernize the country’s securities with blockchain technology.

According to the official statement, the authorities outlined the importance of digital securities. Moreover, the adoption of digital securities is one of the main aspects of the federal government’s blockchain technology.

Let’s have a look at current legislation in the country. Currently, financial instruments that are classified as securities must be secured in a document. According to the Federal Ministry of Finance and the Federal Ministry of Justice and Consumer Protection, blockchain technology would help to guarantee liquidity and compliance. In fact, blockchain will replace the paper certificate.

Based on the information provided by authorities, the proposed draft bill also improves regulatory clarity. Notably, this draft bill will specify that the Federal Financial  Supervisory Authority will serve as a major regulator when it comes to blockchain-based e-stocks.

Federal Financial  Supervisory Authority and blockchain-based digital securities

Importantly, the Federal Financial  Supervisory Authority will be responsible for monitoring the issuance of digitized securities. Moreover, it will be responsible for the maintenance of decentralized ledgers in accordance with the German Banking Act.

Interestingly, several global jurisdictions achieved some progress with blockchain-powered digitized securities. For example, in July of this year, Arca Labs launched Ethereum-based trading in the U.S for a new fund composed mainly of shares of U.S. Treasury securities.

In June, a major Japanese traditional financial institution, Tokai Tokyo Financial Holdings made an announcement. According to this announcement, it plans to launch a digital security exchange in Japan. Notably, the company plans to apply blockchain technology to the financial industry for issuing digital securities.

Federal regulators want to modernize the country’s securities with blockchain technology. German lawmakers are advised to support such bills.