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Crypto security

Crypto securities are a new form of issuance for bearer bonds via a DLT-based crypto securities register.

What are crypto securities?

Crypto securities are electronic securities distinct from digital assets such as cryptocurrencies and security tokens. Unlike those, crypto securities do not require a crypto custody business license, but are classified as regular custody business.

Registration in the crypto securities register

Crypto securities: collective and individual entrie Figure 1: Crypto securities: collective and individual entries

Bearer bonds can be issued as crypto securities and registered in a crypto securities register. Legislators haven’t decided on a specific technology yet, which leaves room for market innovation. However, the regulatory framework set by the German Electronic Securities Act (Gesetz über elektronische Wertpapiere, eWpG) are oriented towards blockchain or distributed ledger technologies.

Relevance of crypto securities

The practical relevance of crypto securities becomes particularly evident in cases where the issuer does not aim for stock exchange trading of the respective financial instrument, as it is not possible to connect them to the securities register of a central securities depository. This is because stock exchange trading of crypto securities is not provided for by European law (cf. Art. 3 CSDR). However, considering the DLT pilot regime, a trading solution via tokenized assets will certainly be found in the future.

Under the DLT pilot regime, crypto securities could be digitally securitized via tokens, which would make them tradeable on crypto exchanges or DLT-based trading exchanges. After all, crypto securities can be registered collectively as well as individually.

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Julian Schmeing / author BankingHub

Julian Schmeing

Partner Office Munich
Philipp Kerber / author BankingHub

Philipp Kerber

Senior Consultant
George Stylianou / author BankingHub

George Stylianou

Senior Consultant Office Berlin

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How is the market for electronic securities and technical solutions developing? Is scalability the main differentiator? In cooperation with tokenforge, we take a look at the current development of the market for electronic securities and technical solutions for maintaining a crypto securities register.

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