Schalast | Electronic securities

A new law makes possible in Germany what was previously not achievable in this country: The law on electronic securities (eWpG) now allows securities without paper. This opens wide the door to fully digitized, even more efficient securities trading with high disruptive potential. In doing so, eWpG must fit into an existing, complex capital market law regime made up of genuinely national, European-based and European regulations that apply directly in the member states, with custody account aspects being central.

At Schalast, we accompanied the eWpG creation within the framework of the “Electronic Securities” working group of the Federal Blockchain Association and participated in the legislative process position statements.

The legislature has managed to achieve a balancing act: eWpG is designed to be technology-neutral and combines progress, such as DLT systems, with proven property law principles In this way, known systems can be continued and modernized, especially with regard to processing securities trading. But completely new business models are also possible, such as establishing a crypto central register, which is particularly interesting for start-ups.

The emerging new ecosystem surrounding electronic securities will be one of the most powerful game changers in financial and legal services over the next decade. This initially affects large parts of listed shares, private equity investments in the form of conventional fund structures and other financial instruments. Such assets are already publicly accessible to everyone, mostly via stock exchanges - the so-called public markets. But it can be assumed that alternative investments will be brought onto the market "once again" in the future using blockchain technology in the form of digital securities / tokens. At the same time, however, this is the hour for private markets.

The private markets area is about illiquid assets from industrial companies, infrastructure projects and, in particular, companies not listed on the stock exchange that have future technologies at their disposal.

So far, these assets are not financial instruments and, as a rule, are not yet publicly accessible. Typically, these are (1) industrial assets (machines, goods, production lines, tools, robots, etc.), (2) infrastructure projects (energy generation and storage, transport, logistics, traffic, mobility, water and food, IT, health, education, social, etc.), (3) companies with future technologies (digital IPOs for young and established companies in all stages of development). The eWpG will make private markets products investable for the general public.