In November 2023, the German Parliament adopted the Act on Financing of the Future (Zukunftsfinanzierungsgesetz, “ZuFinG”), which will allow German stock corporations to issue stock “on chain” (crypto-shares). This is achieved by amending the existing German Act on Electronic Securities (“eWpG”) and the stock corporation law. However, a few requirements will need to be fulfilled. In particular, a change from a traditional paper-based issuance to crypto shares will require that all existing shareholders agree, which may be difficult in companies with many shareholders. In addition, all crypto securities issued under the eWpG will require the appointment of a crypto securities registrar who is duly licensed for such activity under the German Banking Act. Nonetheless, the eWpG is slowly gaining traction in Germany. Since the inception of the eWpG in the summer of 2021, securities have been issued as crypto securities more than 60 times with the help of several crypto securities registrars (of which 44 issuances happened in 2023 alone). Also, in November 2023 the German regulator BaFin published a new guidance notice on crypto securities registrars which also provides useful insight to distinguish crypto securities registrars from securities custodians and crypto asset custodians.
To view a comprehensive look at the German regime for issuing securities in tokenized form, click here