- L Higgins and M Bacina
Germany wilkommens 'technology enabling' legislation for blockchain based shares
The German government is planning to introduce a 'Future Financing Act' to improve financing for future investments and to facilitate capital market access for startups, growth companies, and SMEs. The German government believes the Future Financing Act is necessary to strengthen the German capital market and increase its attractiveness to national and international companies and investors.
In particular, Germany plans to advance the digitalisation of the capital market in Germany by enabling companies to issue shares using blockchain technology. Rules already in place allowing the tokenisation of bonds and fund units will be extended to also capture 'normal' securities. Tokenisation is the current hot topic in the Web3 space, with many believing it to be one of the most compelling use cases. The Act also aims to improve the transferability of crypto assets, and reduce the formal/legal requirements of digitisation.
In December 2022, Germany's top regulator (BaFin) called for global regulation of the cryptocurrency industry to protect consumers, prevent money laundering, and preserve financial stability. The president of BaFin, Mark Branson, said a 'hands-off' approach would simply not work for the industry. The Future Financing Act is a positive move for Germany and hopefully marks a change in tone, given the German Minister of Finance's dim view of stable coins, calling them previously "wolf in sheep's clothing". Germany has been involved in the European Union's development of the Markets In Crypto Assets Regulation (MiCA), which aims to establish harmonised rules for crypto-assets at the European Union level.
The 'finalised' version of MiCA is expected sometime this year, with jurisdictions around the world sure to take inspiration from MiCA in their own legislative approaches. EU country-specific legislation like the Future Financing Act will likely be heavily influenced by MiCA.
The Act is also an interesting point when 'tech neutrality' is raised around legislation and regulation of digital assets. Forward thinking jurisdictions are recognising that foundational technologies like blockchain require technology-enabling regulatory changes, and a 'technologically neutral' approach, which simply requires meeting rules, including through the use of technology (irrespective of what that technology is) will not be sufficient to harness the benefits which come from a technology like blockchain and distributed ledgers.