The German government wants to introduce draft regulations for blockchain assets this summer. The focus is on regulating asset tokenization and creating legal certainty.
In February, ICO.li reported on the German government starting a consultation process asking blockchain companies for advice. The goal was to assess the opportunities and pitfalls of the technology and formulate a blockchain strategy by summer 2019.
It’s Mai now; summer is coming. And indeed, the German government seems eager to move ahead. According to the German business news outlet Handelsblatt, the government plans to introduce draft regulations for the issuance of blockchain bonds in the coming months.
Thomas Heilman, the blockchain correspondent of the CDU, the political party ruling the current coalition government, says, “We consider it to be of crucial importance to move blockchain technology forward in Germany, specifically in 2019.”
According to Handelsblatt, there is already a summary paper in place that will be used to draft up legislation. It focuses on the regulation of blockchain-based bond issuances and aims at recognizing digital tokens as legally valid assets.
The fact that the government is primarily concerned with bond issuances is undoubtedly inspired by the Bitbond Security Token Offering (STO), the first-ever STO that was approved by the German financial markets regulator Bafin earlier this year. Bitbond tokenized a bond structure, issuing a token that grants investors rights to coupons and principal payments.
Investor protection seems the government’s prime concern
Currently, there are no blockchain-specific regulations in place in Germany. Thus, STOs fall under the European MiFID regulations, while ICOs remain mostly unregulated. The Bafin has in the past taken a conservative stance, especially regarding cryptocurrency and has shut down multiple crypto-exchanges.
The government has set eyes on asset tokenization, which is said to become a megatrend over the coming years. Heilman explains lawmakers are considering using notaries for token transactions. If an issuer becomes insolvent, token holders can transfer their token to a licensed notary, who then issues the legal paperwork required to seize the issuer’s assets. This way, the government aims at eliminating a current grey zone around token issuances and provides more legal security for token holders.
Lawmakers under pressure to take action; neighboring countries are getting ahead
Even though Germany is Europe’s largest economy and a worldwide leading technology nation, it has so far not taken any steps to accommodate blockchain businesses. Other nations, such as neighboring Switzerland and Liechtenstein, have been more proactive. Liechtenstein has just introduced the Blockchain Act, the first holistic regulatory framework for a token economy.
Frank Schaeffler, the blockchain expert of the German liberal party FDP, says, “The government has finally woken up. Now things need to move fast. Crypto issuers and investors are looking for a regulated financial marketplace for their activities which can compete on the international stage. Germany has a chance to get ahead of the curve.”
Schaeffler also points to Liechtenstein‘s Blockchain Act. Several businesses in Liechtenstein have already launched STOs and rolled out blockchain bonds including various asset classes. It’s about time for Europe’s leading economy to get in gear, too. While German lawmakers are still planning, others are already taking action.