One of the most revolutionary ideas that came out of the crypto industry was the concept of digitized securities. The use of smart contracts to automate regulatory compliance is one of the key benefits. Authorities in Germany are now looking to leverage Blockchain tech to modernize the nation’s securities.
The German Federal Ministry of Finance (BMF) along with the Federal Ministry of Justice and Consumer Protection (BMJV) introduced a draft bill on August 11 that discusses the implications of blockchain-based digital securities.
In the official statement, the authorities highlighted that the adoption of digital securities is one of the important aspects of the federal government’s Blockchain strategy for the nation.
As per the current legislation, any financial instrument that has been classified as securities must be stored in a document, but the use of blockchain tech would guarantee liquidity and compliance by providing a replacement for the paper certificate, the BMF and BMJV said.
Besides, the proposed bill has also increased regulatory clarity, hinting that the Federal Financial Supervisory Authority will play a major role in regulating the Blockchain-based e-stocks market.
Popularly referred to as BaFin, the agency will also monitor the issuance of the digital securities while overseeing the maintenance of the decentralized ledgers in accordance with the German Banking Act, the official statement added.
Adapting the legal framework to new technologies, especially blockchain technology, also focuses on strengthening Germany as a place of doing business and increase transparency, market integrity, and investor protection, the regulator added.
German authorities aren’t the only ones working towards a digitized future for the securities market. Earlier this year, Japanese traditional financial institution Tokai Tokyo Financial Holdings, revealed its plans to launch a security token exchange in Japan.
The company noted that it plans on implementing Blockchain tech to enable the issuance of digital securities.
Besides the government, multiple financial institutions in the nation have expressed their interest in blockchain and cryptocurrencies.
According to an announcement from BaFin back in February 2020, the regulator received more than 40 “expressions of interest” from banks for approval to operate a crypto custody business in the future.
The renewed interest in cryptocurrencies was the result of the new German Money Laundering Act that came into effect at the beginning of 2020. The new regulations allow banks and financial institutions to offer cryptocurrency-based services to their customers alongside traditional investment products.