In the last days of the legislative period, the BMF and the BMJV will publish a draft ordinance for the issue of crypto fund shares.
It was not until the beginning of June that the federal government set an example for the digital transformation of the financial system with the “Law on the Introduction of Electronic Securities” (eWpG). From then on it was possible to deposit certificates of bonds and share certificates without paper. Now the grand coalition is extending the scope of application to so-called crypto fund shares for the last days of government. That goes from a first Draft regulation Ministry of Finance and Justice. The paper is currently still available for examination by the federal states and associations.
Should the regulation come into force in this way, providers of investment funds could in future also issue electronic unit certificates as crypto fund units by entering them in a crypto securities register. The registrar must correspond to the depositary of the investment fund. The regulation states:
The peculiarities of the legal status of the depositaries are taken into account by the fact that, contrary to Section 16 (2) of the eWpG, the depositary must be the registrar for crypto fund units.
Ordinance on crypto fund shares of September 6, 2021
Support comes from the Fund Location Act, which has been in force since August. Since then, institutional investors such as pension funds and insurance companies have been allowed to hold up to 20 percent cryptocurrencies in their funds. This could trigger a massive flow of money in the direction of digital assets, says a study by the Tech ThinkTank MINDSMITH. A survey of over 70 investment funds predicted an increase in willingness to invest in digital assets from the DACH region by up to 657 billion US dollars. Currently, however, regulatory uncertainty, a lack of understanding and a lack of infrastructures are holding back interest in the new asset classes. Deficits that the crypto regulation wants to address.
Opinions on crypto regulation are divided
Although the regulation is generally positively received, there have been isolated criticisms. For example, the FDP is bothered by the size of the securities contained in the draft. According to the Liberals, the paper should also have included electronic stocks. To this end, the party submitted an amendment entry at the end of January, but the federal government rejected it. FDP member of the Bundestag Frank Schäffler now tells BTC-ECHO:
Germany remains far behind the technical possibilities. That must change under the next finance minister.
Frank Schäffler, member of the Bundestag for the FDP towards BTC-ECHO
“Choice of depositary is somewhat restricted”
In general, the call for the inclusion of further securities extends beyond politics. In addition to the FDP, various industry representatives such as the banking association are calling for digital shares to be taken into account. In addition, Cashlink criticizes the limited choice of depositary. The Frankfurt FinTech was recently in the headlines when it was one of the first companies to apply to Bafin to keep a crypto securities register. CMO Benedikt Scheungraber told BTC-ECHO about the regulation:
In principle, we at Cashlink welcome the expansion of the eWpG to include share certificates for investment funds. We assume that the eWpG will gradually be expanded to include more and more financial instruments in the future. Fund shares are of course a step in the right direction. Unfortunately, the new regulation is somewhat restricted as the fund’s custodian has to keep the crypto securities register. However, through cooperation between custodians and fintechs with the right technology, we still see a lot of potential here to digitize the fund location Germany.
Cashlink CMO Benedikt Scheungraber opposite BTC-ECHO
In fact, the eWpG is to be re-evaluated after three years. The inclusion of electronic shares would consequently affect the coming federal government. It remains to be seen whether the choice of custodian can be made a little more liberal.