In a surprise move, the German Ministry of Finance has called for recognition of blockchain-based securities as a legitimate form of financial instrument.

Friday’s announcement suggested that German law needed to recognize these types of securities, and legislation should be brought into place to support the changes. The new paper published by the ministry last week stated that “the currently mandatory documentary embodiment of securities (paper form) should no longer apply without restriction.”

The German government wants to start with electronic bonds and then later address digital shares. Such securities would in future be registered by a single government agency as yet to be established. This, in the view of the ministry, would ensure no risk of tampering or manipulation. In terms of utility tokens, the paper outlined:

“As a rule, utility tokens do not constitute securities, investments or other financial instruments under the German Securities Trading Act and in most cases will not be electronic bonds in the future,” although “it could be determined by law that a public offer of utility tokens may only take place if the provider has previously published an information sheet.”

There is also a draft bill on Security Token Offerings (STOs) passing through the German Parliament, although in the opinion of Christian Democratic Union (CDU) member Senator Thomas Heilmann, who maintains that although it is an interesting technology “many people don’t understand it,” showing there is still a fintech gap in Germany’s ruling house.

The feeling is that Germany could steal a march on other European nations with this legislation, if passed and become the leader in tokenized finance in Europe, further creating a precedent for EU-wide regulations on security tokens moving forward.

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