German electronic securities law passed

The German Bundestag has passed a law on the introduction of electronic securities (eWpG), clearing the way for digital securities. 

The eWpG will enable the electronic issuance of bonds and share certificates. According to the new law, bearer bonds, Pfandbriefe (covered bonds issued by German mortgage banks) and shares in special funds (share certificates) can now be issued electronically in a document as an alternative to traditional securitisation. The eWpG distinguishes between two types of electronic securities, namely central register securities and crypto securities.

For central register securities, the physical global certificate previously used is replaced by an entry in a database, a central register. Electronic securities are now treated like things by virtue of legal fiction, which creates legal certainty and continuity for on-exchange securities trading. Central registers can be kept by credit institutions or a securities depository. The eWpG also enables bearer bonds to be issued as crypto securities, which are to be entered in crypto security registers. Their idea is to create forgery-proof and decentralised databases that serve as security transaction-recording registers. Initially, crypto securities will only be of relevance for securities that are not traded on an exchange, as there is currently no regulated secondary market for blockchain securities in Germany.