With the implementation of the Electronic Securities Act (eWpG), Germany has taken a significant step towards the digitalization of the financial sector. This law, which came into force on June 10, 2021, aims to modernize and simplify procedures related to the issuance and trading of securities.

July 13, 2024 
Franc Smidt, 
Journalist, Germany

Significance of eWpG

The eWpG law allows for the issuance and storage of securities in electronic form without the need for paper certificates. This innovation applies to both debt and equity instruments. The primary goal of the law is to create a more efficient and secure system for managing securities.

One of the key aspects of the law is the introduction of central registrars, who will be licensed by the Federal Financial Supervisory Authority (BaFin). These registrars will maintain records of electronic securities, ensuring their security and legal protection.

Additionally, the law supports the use of distributed ledgers, such as blockchain, for recording and transferring rights to electronic securities. This enables the application of advanced Distributed Ledger Technology (DLT) in the financial sector, making processes more transparent and secure.

Practical Application of eWpG: Example of DekaBank 

The recent announcement by DekaBank about issuing digital bonds without intermediaries demonstrates the practical application of the new legislation. As part of the European Central Bank’s (ECB) DLT settlement trials, DekaBank successfully issued a digital security, marking an important step in the development of blockchain technologies in the financial sector. The bond was issued on the SWIAT network, which currently includes 24 institutions. SWIAT has integrated its blockchain with the Bundesbank’s trigger solution to support payments.

Earlier, in early 2024, Deka Investment, one of Germany’s largest fund providers, issued tokenized fund shares within the SWIAT decentralized financial market infrastructure (dFMI). DekaBank established SWIAT alongside other sponsors, including LBBW and SC Ventures from Standard Chartered.

This news highlights the opportunities that the eWpG law has opened up for market participants and the drive for innovation in this field. The use of blockchain technologies can significantly reduce costs and time for transactions while increasing transparency and security.

Clearly, this deal paves the way for investment market participants into the world of digital finance. It is a case where the law is progressive and works for the benefit of the financial market’s development, keeping pace with the times. It not only simplifies and modernizes the process of issuing and trading securities but also opens new opportunities for using advanced technologies such as blockchain.

Examples like DekaBank’s issuance of digital bonds show that the future of the financial sector will be closely tied to technological innovations. At the end of last year, SWIAT already voiced its expectations for Europe: “By 2030, the decentralized financial market will grow by more than 60 percent annually (CAGR) and exceed 3 trillion euros.” Other global forecasts predict $16 trillion by BCG and $28 trillion by EY.

For more detailed information, you can read the text of the law on the official website of the Federal Office of Justice Germany: Gesetz über elektronische Wertpapiere (eWpG), and read the news about DekaBank on the Ledger Insights website: DekaBank Issues Digital Bond Without Intermediaries as Part of ECB DLT Settlement Trials.