Business 15 March 2019

Dan Taylor

German banks seek ‘necessary’ new regulation for DLT securities

An association of German banks has said new regulation could be necessary to cover blockchain-issued securities, to strengthen legal certainty around the emerging asset class.

Bankenverband, which represents German private banks, posted a discussion paper to its website earlier this week, citing a number of concerns over existing regulations, which it suggests are unable to adequately regulate this new class of securities.

In particular, the paper addresses settlements and safekeeping as two salient issues in need of further regulation, while measures around corporate actions and securities trading should also be considered by lawmakers for further updates.

The discussion paper goes further still, suggesting that “adaptations of civil and regulatory requirements at national and European level may be necessary,” in order to contend with the changing landscape around digital securities.

Blockchain regulation has become increasingly prominent on the German political agenda, with the Federal Ministry of Finance recently publishing a paper on the treatment and regulation of securities.

The Ministry of Finance paper follows concerns over the legal status of cryptocurrencies and blockchain-issued securities, and over whether these are covered within the scope of securities laws as they currently stand at a Federal level.

The Bankenverband statement comes just days after representatives of the Free Democratic Party increased the pressure still further, criticising lawmakers for failing to devise a suitable structure of regulation for the sector, which they say has led to a lack of legal certainty for those dealing in digital assets.

In particular, they argue there is a need for greater clarity around token issuance and cryptocurrency trading, the lack of which they say is responsible for holding back the emerging cryptocurrency sector in the country.

More recently, the Cabinet of Germany has confirmed its blockchain strategy will be deployed by the middle of this year, following a consultation process involving stakeholders and relevant government departments, with a view to establishing Germany as a global fintech leader.

Beyond Germany, regulation around blockchain securities has become an increasingly important issue for lawmakers and regulators worldwide, with various stakeholders calling on governments to clarify their position.

Note: Tokens on the Bitcoin Core (SegWit) chain are referenced as BTC coins; tokens on the Bitcoin Cash ABC chain are referenced as BCH, BCH-ABC or BAB coins.

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