KryptoFAV: New regulation for crypto fund shares

Crypto-friendly signals from Berlin: A new regulation for crypto fund shares (KryptoFAV) has been in force since June 18. German funds can now also issue their share certificates based on the blockchain.

the bilateral regulation appeared in the Federal Law Gazette on June 17. “Crypto fund shares are electronic share certificates entered into a crypto securities register,” the terse letter reads. The law grants issuers a degree of flexibility. Because shares in special funds such as securities can be issued completely or only partially as crypto fund shares. As expected, the crypto industry reacted enthusiastically to the legal innovation.

Who maintains the crypto securities register?

In the run-up to this, however, the question of keeping the register was a headache. In contrast to electronic securities, a draft of the KryptoFAV ​​from September 2021 stipulated that the custodian or custodian of the crypto fund must also take on the task of keeping the register.

But Berlin has now moved away from this. Because the final legal text allows the custodian to commission another company that is approved for this purpose to keep the register. The federal government is thus opening up this part of fund management to new providers who focus on crypto register management.

Frank Dornseifer, Managing Director of the Federal Association of Alternative Investments, warned against the Stock exchanges newspaper nevertheless before a gatekeeper role of the classic custodian banks. Ultimately, they have the right to decide whether to pass on the management of the register. He hopes that mutual funds and other custodial firms will pass their preferences on to custodians.

custodian and registrar

So far, there are not particularly many companies in Germany with a dedicated license for keeping crypto registers. Last September, BaFin counted a single-digit number of applicants. This included the Frankfurt FinTech cash link.

So far, BaFin has only granted provisional permits. As of June 10, 2022, the companies in question had to submit a complete application for a permit. In addition to a regulatory initial capital of more than 150,000 euros, the admission criteria also include minimum standards for the security of the IT systems used.

On the other hand, the application process is much more advanced for German crypto custodians – i.e. companies that are entrusted with the safekeeping of digital assets. BaFin has received 25 applications. The Bitcoin exchange is bustling underneath binance, but also traditional financial institutions such as Commerzbank. BaFin has already issued four of the coveted licenses. Most recently in March to the FinTech upvest.