The German ministries of Justice and Finance have released a discussion paper exploring crypto regulations that would make use of blockchain technology’s potential, while also shielding investors, and averting misuse.
“The Federal Ministry of Finance has published a key issues paper together with the Federal Ministry of Justice and Consumer Protection. It discusses the introduction of electronic securities and the regulation of the public offering of certain crypto-tokens. The measures aim to strengthen the role of the Federal Republic of Germany as one of the leading digitization and FinTech locations,” said a statement announcing the paper.
In their guidelines, the authors of the paper propose the creation of an electronic register, run by the government, designed to regulate the activities in the sector while protecting investors.
“The public offering of crypto-tokens (Initial Coin Offering – ICO)… 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 – unlike the future issue of electronic bonds – will not be subject to existing capital market regulations. At the same time, investing in crypto tokens poses risks for investors. Against this background, the regulation of the public offer of these tokens is put up for discussion in the key issues paper,” continued the statement.
Initially the new, eased rules would be applicable electronic bonds only, while in the second step would include digital stocks.
“The opening is initially limited to electronic debt securities. The introduction of the electronic share should not be dealt with at this time. The regulatory burden that would be necessary would preclude a timely introduction of the electronic security,” continued the statement.
According to their representatives, the ministries are now waiting for responses to their paper – which is the first step in the government-approved blockchain strategy – before drafting a revised proposal.
“German law should generally be opened up for electronic securities. The regulation of electronic securities should be technology-neutral, ie the issue of electronic securities should also be possible on Blockchain / Distributed Ledger Technology,” said the statement.