On 16 December 2020, the German federal government submitted a draft of the Law on the Introduction of Electronic Securities (elektronisches Wertpapiergesetz, hereinafter referred to as RegE-eWpG), further advancing the legislative process leading to enactment.
The draft bill serves to modernise German securities law and associated supervisory legislation by – as a first step, initially only for debt securities and, to a lesser extent, share certificates:
- Enabling electronic securities
- Introducing securities trading on the basis of blockchain technology
- Making this legally secure
Current legal situation in Germany
German law currently requires financial instruments that qualify as securities (Wertpapiere) to be securitised in a physical document in accordance with the German Civil Code.
The legal basis for electronic trading is currently a single, physical global certificate, which is held in possession for all investors by Clearstream Banking AG, a subsidiary of Deutsche Börse AG. The investors are co-owners of this global certificate on a fractional basis and – through their custodian banks affiliated with Clearstream Banking AG – co-possessors. This legal structure – a transfer in rem (dingliche Übereignung) as opposed to a pure acquisition of rights – enables a bona fide acquisition (gutgläubigen Erwerb), which in turn serves to protect potential acquirers in the market.