Background of KryptoFAV

The German Crypto Fund Shares Regulation (”KryptoFAV“), which came into force on June 18th, 2022, expands the German Act on the Introduction of Electronic Securities (”eWpG“). One of the core aspects of the eWpG was that it only applied to bearer bonds. With the introduction of KryptoFAV, the eWpG was expanded with crypto fund shares.
Although the amendment to Section 95 KAGB within the framework of the eWpG has already created the option for German special funds to issue fund shares in electronic form, which eliminated the need for a physical global document and enabled registration in a central electronic securities register, the introduction of the eWPG did not yet provide for crypto fund shares (i.e. electronic fund shares, which were not in a central register but in a decentralized register central crypto securities register are entered) to be issued. This was changed with the introduction of KryptoFAV.

Contents of the KryptoFAV

Difference between electronic fund shares and crypto fund shares

Crypto fund shares are not entered in a central securities register like electronic fund shares, but in a crypto securities register. Section 16 paragraph 1 eWpG states that crypto securities registers must be kept on forgery-proof recording systems. Distributed ledger technology (e.g. in the form of a blockchain) is suitable for this purpose.

Scope of the KryptoFAV

Registrar in accordance with KryptoFAV

The KryptoFAV deviates from the regulations of the eWpG in the case of the registrars. It states that in the case of crypto fund shares, only the depositary and companies commissioned by it that have a license to maintain crypto securities registers are eligible as registrants. However, the depositary must ensure that it can comply with legal obligations even if such an assignment is made.