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German Financial Authorities approve listing of Electronic Securities on Blockchain

German Financial Authorities approve listing of Electronic Securities on Blockchain

According to the reports, Germany’s Federal Ministry of Finance announced that the German cabinet passed its draft legislation on electronic securities. It constitutes blockchain-based securities. This happens after the initiation of the draft in August this year. This indicates that it will no longer be required to possess a paper stock certificate. Thus, recording digital securities or tokens on an electronic ledger and allowing digital custody. 

The purpose behind the blockchain-based electronic certificates is to secure investors’ interest while assuring Germany’s financial markets’ functionality, integrity, and transparency. This also results in Germany fulfilling some of its blockchain strategy goals set last year, promoting the technology.

Paper certificates’ substitution is with an insertion in a central securities depository or a register maintained by private-sector banks. An entry in a crypto securities register based on blockchain technology is also desirable. Justice Minister Christine Lambrecht stated that the law would offer legal clarity and improve the new technologies’ potential. Blockchain technology is a digital ledger in which all information about a transaction is saved in encrypted form. Moreover, the information is public, which presents a high degree of transparency.

The technology is imitation-proof. As every user has access to a copy of the database, it is difficult to manipulate it. As mentioned above, the Finance Ministry proposed the bill in August. Thus, alleging it would preserve the integrity, functionality, and transparency of the German stock market. It unveiled that the Federal Financial Supervisory Authority (BaFin) will control the electronic securities issuance and preserve the digital ledgers. 

Moreover, the bill’s initiation resulted in the German Stock market giant Deutsche Börse to draw a blockchain-based securities issuance project held with the Swiss stock exchange SIX. In its report, the company said that the new law would generate avant-garde framework requirements for financial markets infrastructure based on Blockchain Technology and the associated alterations in the KWG legislation (Banking Act).

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