Crypto securities registry
Crypto securities registry as a service subject to authorisation
Through the German Act on the Introduction of Electronic Securities (”eWpG“), crypto securities registry was included in the German KWG as a new financial service. Companies that want to provide this service need permission from the German supervisory authority BaFin since the eWpG came into force. We support you in entering into the crypto securities registry business and the eWpG.
What are crypto securities registrars?
As the name suggests, crypto securities registrars are responsible for keeping records of crypto securities in accordance with Section 16 of the eWpG. It must be ensured that the crypto securities register is maintained on a forgery-proof recording system (e.g. a blockchain), in which data is logged in time sequence and stored in a protected manner against unauthorised deletion and subsequent alteration. The crypto securities register replaces the paper-based document in the traditional sector.
In addition to crypto securities registry, the eWpG also enables the issuance of electronic securities with the help of central registry management.
What are crypto securities?
Crypto securities are a form of electronic securities that are registred in a crypto securities register. As an alternative to traditional securitization through a physical document, bearer bonds and crypto funds can be issued by registration in a crypto securities registry. The current draft of the German Future Financing Act also provides for the ability to issue shares in the form of crypto securities in the future.
How do crypto securities differ from security token sui generis?
Before the introduction of crypto securities, there was already another form of tokenized securities — so-called security tokens. A security token (also known as security token sui generis) is a token that is considered a security in accordance with MiFID II. The key difference between crypto securities and security tokens is the increased security. Security tokens are considered securities only from a regulatory point of view; crypto securities are also seen as securities from a civil law perspective. This results in the so-called “good faith protection”, which security tokens do not offer. If an investor purchases a crypto security from an unauthorized seller, the acquirer can still become the new legal owner of the crypto security as long as he had no knowledge of the seller's lack of authorization. This feature enables more reliable transmission.
Benefits of crypto securities
No central securities depository
required
No interaction with the central securities depository when settling securities and omission of the physical global document.
Direct trade between investors
Investors can interact with each other directly in legal transactions.
No dependence on working hours
Crypto securities enable 24/7 tradability and are not linked to working hours of intermediaries.
Real-time settlement
Settlements are conducted on the same trading day (T+0).
How are crypto securities stored?
According to the eWpG, the depositary of crypto securities requires a permit to operate the depository business. Securing the private cryptographic keys of the crypto securities requires a permit to operate the crypto custody business, provided that the service is provided for others and the custody of the crypto securities themselves is not taken over at the same time.
If, in addition to the crypto securities, associated cryptographic keys are also secured as part of the depository business, no separate permission is required to secure these cryptographic keys. However, the relevant technical risks arising from this activity must be considered and appropriate security measures must be put in place.
How do we support you?
FinPlanet is your one-stop shop for the topic and crypto securities and eWpG!
We provide you with full support, from an initial assessment to potential license applications. In particular, our consulting includes the following services:
- Assistance in analysing your advantages and disadvantages of using crypto securities;
- Workshops;
- Support with license applications;
- Review and optimization of your internal processes with regard to requirements;
- Support for new product processes in accordance with the German MaRisk AT 8.1 (”NPP“);
- Development of a target operating model;
- Evaluation of the appropriate type of register based on your business model;
- Adjustments of your written guidelines;
- Assistance in the selection of service providers;
- Project management;
- And many more...