Germany's Electronic Securities Act: Digitalising the Bund

Germany’s approach to tokenized securities law reveals a characteristic national preference: incremental modernisation of existing systems over radical innovation. The Electronic Securities Act (Gesetz über elektronische Wertpapiere, or eWpG) did not create a new regulatory category for crypto assets. It removed a requirement — the paper certificate — that had been assumed to be definitional for German securities law since the nineteenth century.

That removal is more consequential than it sounds. German securities law, rooted in the Civil Code and the Securities Trading Act, had long treated the physical certificate as an integral element of securities ownership. To hold a German security was, in a technical legal sense, to hold a piece of paper. Electronic custody arrangements were permitted, but they were workarounds — centralised depositories holding the underlying certificates on behalf of investors.

The eWpG resolves the paper requirement, enabling securities to exist as purely electronic records — and crucially, allowing those records to be maintained on distributed ledger systems that no single entity controls.

eWpG’s Scope

The eWpG covers two categories of electronic securities:

Electronic registered securities (elektronische Namensschuldverschreibungen): Securities for which ownership is recorded in an electronic register, similar to existing name-registered debt instruments. The register can be maintained by the issuer, a registered securities register keeper, or — under the DLT variant — on a blockchain or similar distributed ledger.

Electronic bearer securities (Kryptowertpapiere): Securities that function like bearer instruments but exist as cryptographic tokens on a distributed ledger. The innovation here is that the legal ownership rights attach directly to the token — holding the token means holding the security, without any intermediary custody relationship required.

The bearer security (Kryptowertpapier) is the more legally radical innovation. It enables a genuinely decentralised form of securities ownership in which the blockchain record is the legally authoritative source of ownership — not a custody account at a depository institution.

How DLT Qualifies as an Electronic Register

For DLT-based securities, the eWpG requires that the distributed ledger meet certain technical standards: immutability, accessibility to authorised parties, and operational continuity. BaFin has issued guidance on what types of DLT systems satisfy these requirements.

Crucially, the eWpG does not mandate a specific DLT system. Public blockchains, permissioned DLT systems, and private blockchain networks can all potentially qualify, provided they meet the functional requirements. BaFin has taken a technology-neutral approach — the legal question is whether the system functions as a reliable electronic register, not what specific technology it uses.

The register keeper for DLT-based securities must be licensed by BaFin. This creates a new regulated activity category: the crypto securities register keeper (Kryptowertpapierregisterführer). Licensed register keepers include financial institutions and, increasingly, specialised technology companies that have obtained the required authorisation.

BaFin’s Role

BaFin occupies a dual role in the eWpG framework: as the regulator that licenses and supervises register keepers, and as a potential register keeper itself for certain categories of securities. BaFin’s involvement ensures regulatory oversight without removing the flexibility that DLT-based securities require.

BaFin has been constructively engaged with the eWpG’s implementation. The regulator has issued guidance on register keeper requirements, handled licensing applications from technology companies seeking to enter the market, and engaged with issuers on the disclosure obligations that apply to electronic securities.

Germany’s financial regulator has a mixed reputation on crypto — its enforcement actions against unlicensed businesses have been aggressive, and its application of existing financial services law to crypto products has sometimes created friction for industry. On eWpG implementation, however, BaFin has been notably constructive.

Early Issuances

The early history of Germany’s DLT securities market features some significant institutional transactions.

The European Investment Bank issued a digital bond on a private blockchain in 2021, working with Goldman Sachs, Santander, and Societe Generale. The issuance used French law rather than eWpG (France had its own parallel legislation), but demonstrated that major supranational institutions were willing to tokenize debt instruments.

DZ Bank, Germany’s cooperative banking group, issued Germany’s first electronic bearer bond (Kryptowertpapier) under eWpG in 2023 — a landmark transaction that demonstrated the commercial viability of the framework. The bond was listed on Stuttgart’s digital exchange segment.

Siemens issued a digital bond in February 2023 using blockchain infrastructure, one of the first major German corporate issuances under eWpG. The transaction settled in commercial bank money and demonstrated that the corporate sector could access the framework for routine financing.

eWpG’s Interaction with MiCA

Germany’s eWpG and the EU’s MiCA regulation address different parts of the digital asset landscape. MiCA regulates crypto-assets — predominantly utility tokens, payment tokens, and asset-referenced tokens used in the crypto economy. eWpG modernises German securities law to accommodate DLT-based issuance of conventional financial instruments.

Securities issued under eWpG are not MiCA crypto-assets — they are securities, regulated under the existing securities law framework including MiFID II and the Prospectus Regulation. MiCA explicitly excludes financial instruments from its scope. The two frameworks are complementary rather than overlapping.

This matters for market participants. A company issuing a tokenized bond under eWpG faces securities disclosure and transparency requirements — the full apparatus of German and EU securities regulation. It does not face MiCA compliance. A company issuing a utility token in the crypto economy faces MiCA. The distinction reflects the fundamental difference between tokenization of traditional financial instruments and the issuance of new categories of crypto assets.

Frankfurt’s Tokenized Capital Markets Position

Frankfurt’s position as the EU’s leading financial centre gives Germany’s eWpG framework particular significance. The Deutsche Börse Group — which operates the Frankfurt Stock Exchange — has been actively building DLT-based infrastructure for securities settlement. Its D7 platform for digital securities issuance and settlement is designed to integrate with eWpG-compliant instruments.

As tokenized securities become more prevalent in EU capital markets, Frankfurt’s existing institutional relationships, regulatory expertise, and market infrastructure position it as the natural hub for institutional tokenization activity. The eWpG framework is a necessary but not sufficient condition for that outcome — market development also requires liquidity, investor demand, and continued regulatory clarity. But the legal foundation is in place, and Germany’s institutional financial sector is building on it.