On 3 April the German Finance Ministry announced[i] plans for introducing a Future Finance Act as a stepping stone for a regulatory basis for the issuance of electronic shares on DLT registers.

With tokenisation of bonds and certain funds already made possible under the German Electronic Securities Act (eWpG), cryptographically generated and registered shares is set to be a step further in a quest to better foster and accommodate the start-up atmosphere as well as to effectively facilitate access to the capital market, among other things.

The key elements of the Act are as follows:

“i. Reduction of the minimum capital for an IPO from currently 1.25 million euros to 1 million euros;

ii. Facilitation of investments by institutional investors regarding start-up and growth companies as well as SMEs, alongside better framework conditions for modern types of transactions such as special purpose acquisition companies;

iii. Digitisation of the capital market, namely a possibility to issue shares with electronic securities;

iv. Examination of improved portability of crypto assets;

v. Introduction of shares with multiple voting rights;

vi. Greater digitisation and internationalisation of supervision and supervisory laws;

vii. Incentives to build wealth, particularly through investing in stocks, through changes in the employee savings allowance; and

viii. Tax amendment and simplification of employee capital participation.”

On the other hand, a new law, Law No 8055[ii], has recently been adopted in Luxembourg, applicable as of 23 March, encompassing a set of amendments in the context of collateral and financial instruments alongside a partial integration of the EU DLT Pilot Regime Regulation – allowing for the strengthening of the jurisdiction’s overall DLT strategy.

The new framework essentially targets the law of 2005 on financial collateral arrangements, and brings clarity to the qualification of those financial instruments booked in securities accounts which are held on DLT registers as financial instruments within the meaning of the existing law. As a consequence the collateral arrangements over such financial instruments would also equally be covered by a range of protection mechanisms within the scope of the law of 2005.

In other words, the new law stipulates eligibility within its scope of financial instruments irrespective of “whether these […] are in physical form, dematerialised, transferable by book entry, including securities accounts held within or by means of secure electronic record-keeping mechanisms, including distributed electronic ledgers or databases, or delivery, bearer or registered, endorseable or not and regardless of their governing law.”

Notably, already as of August 2021[iii] Switzerland spearheaded these innovative approaches by amending the existing federal laws in order to effectively accommodate the developments in DLT and DLT -based registers.

[i] See here https://www.bundesfinanzministerium.de/Content/DE/Downloads/Finanzmarktpolitik/2022-06-29-eckpunkte-zukunftsfinanzierungsgesetz.pdf?__blob=publicationFile&v=8.

[ii] See here https://www.chd.lu/fr/dossier/8055; https://wdocs-pub.chd.lu/docs/exped/0133/035/266359.pdf.

[iii] See here https://www.admin.ch/gov/en/start/documentation/media-releases.msg-id-84035.html.