The German Government has passed legislation that would allow for all-electronic securities. This comes as part of a wider initiative to make a legal framework for blockchain technology.
Clearing the Law Up
On Dec 16, 2020, German Chancellor Angela Merkel’s cabinet passed new legislation regarding securities. The law allows for digital-only securities. In the past, securities had to exist as paper certificates, according to Reuters. Transactions also needed to be performed with paper records.
Finance Minister Olaf Scholz said,
“The paper certificate may be dear to some for nostalgic reasons, but the future belongs to its electronic version.”
He also said that electronic securities will be more cost-effective and will allow for more streamlined processes.
In essence, the law allows securities to exist on blockchains or in some other digital form. Existing paper certificates, which had to be in a depository or bank, can also be replaced with blockchain equivalents under the new law.
Besides a legal framework, Justice Minister Christine Lambrecht said that the law was meant to provide clarity. With the high degree of transparency on the blockchain, property can be kept securely and cheaply. The advantage, according to legislators, is that blockchain is theoretically forgery-proof.
Despite the ongoing race to create a Central Bank Digital Currency, the legality of crypto in many countries is not fully mapped out. This potentially makes Germany one of the first nations to change that.
Though this doesn’t make Germany an unregulated entity in the Crypto Wild West, it is part of a bigger initiative to update laws to meet modern demands. On Dec 10, 2020, the German bank Bankhaus van der Haydt introduced a digital EUR stable coin.
Earlier this year, the German Government presented a bill that would allow for tokenized securities. These changes suggest to some onlookers that Germany is trying to become Europe’s crypto powerhouse.
The need for governments to adapt to blockchain technology is dear, according to some in the republic. Achim Berg, head of the IT business association Bitkom, told Reuters that Blockchain technology,
“has the potential to turn current procedures completely upside down and to fundamentally change the way entire business sectors work.”