Crypto securities registry management: digital assets — centrally regulated
It is a word with 31 letters whose meaning is probably not even known to some financial professionals. We're talking about “crypto securities registry management.” This function was created to include securities without securitisation in a physical document through registration in an electronic securities register. The introduction of crypto securities and the associated registers is an important step towards digitizing and decentralizing traditional capital market processes. Find out exactly what the term crypto securities registry management means and what opportunities it can offer financial market participants.
What is a crypto securities registry?
In recent years, cryptocurrencies and the underlying blockchain technology have developed rapidly. In addition to cryptocurrencies such as Bitcoin and Ethereum, so-called crypto securities are also gaining in importance. These combine the advantages of digital assets with the legal and regulatory framework of securities. A key player in this new ecosystem is the crypto securities registry manager.
In simple terms, a crypto securities registry is a register for electronic securities based on distributed ledger technology (DLT) in the sense of Section 16 of the Electronic Securities Act (eWpG). According to eWpG, bonds denominated in the holder, including covered bonds, may be issued as crypto securities and kept in a crypto securities register. Die Crypto Fund Shares Regulation (KryptoFAV) Since June 2022, has also enabled the digital issuance of share certificates in German investment funds as so-called crypto fund shares, which can also be kept in a crypto securities register. Three things are essential for issuance: Labeling as a crypto security, publication in the Federal Gazette and a notification to the supervisory authority. The legal effect of electronic securities is identical to the legal effect of traditional securities.
Crypto securities registry administrators therefore play a central role in managing and ensuring the integrity of crypto securities transactions. By using modern technologies and complying with regulatory requirements, they make a significant contribution to efficiency, security and transparency on financial markets.
A significant difference between those already known Security Token and crypto securities are subject to registration. Security tokens that are not entered in a crypto securities registry are not recognized as crypto securities. However, they remain a legal alternative - token issuers can therefore choose between issuing a crypto security or a classic security token.
Who can call themselves a crypto securities registry manager?
The Act on the Introduction of Electronic Securities has introduced crypto securities registry management as a new financial service in KWG (crypto custody business) recorded. Companies that want to provide this service therefore need permission from BaFin since the Act came into force on 10.06.2021. A list of crypto securities registry administrators is online at EWPG registry listed. The database itself is not freely accessible, but there is a List of the largest crypto securities registry administrators by issue (as of September 2023). At that time, the top 3 on the list were Cashlink, Smart Registry and GfK.
What are the benefits of crypto securities registries?
In concrete terms, the crypto securities registry offers several advantages, which in their entirety pave the way to a DLT-based capital market Be allowed to open. Although the crypto securities registry currently represents a parallel system to the existing securities infrastructure, the potential benefits are enormous.
- efficiency: As a result of the elimination of the physical global document, no central securities depository is required. Investors can also process legally binding transactions directly.
- time: Bookings no longer take hours or days, but can be made in real time. Crypto securities also enable 24/7 tradability and are not subject to time restrictions imposed by intermediaries.
- Transparency: With the help of the crypto securities register, ownership of the listed electronic securities can be presented transparently and changes of ownership can be carried out through so-called transfers.
conclusion
Regulatory and technological frameworks are likely to create new opportunities for financial market participants through the digitization of securities issues and transactions. A decisive factor for success will be the ability of providers to prepare for the eWPG expansions, which include the crypto securities registry.
For example, platforms must be designed in such a way that they can react flexibly and quickly to new legal requirements. This requires scalable and modular architectures that can be easily adapted and extended.
A comprehensive understanding of the current and future regulatory landscape is also essential. Vendors must be proactive and ensure that their solutions meet the highest compliance standards. In this context, working with regulators, industry associations and other market participants can help to gain early insights into upcoming changes and prepare accordingly.
Providers must therefore act proactively and ensure that they can anticipate and implement technological, regulatory and market-relevant developments in order to meet the requirements of issuers and investors and establish themselves as leading service providers in the long term.
