Germany’s blockchain community has to wait a little longer. The announced draft legislation for blockchain-bonds is not yet ready. The parliament is getting impatient.
According to its own Blockchain-Strategy, the German government wanted to come up with draft legislation for blockchain-based bonds by the end of 2019. The goal was to create a legal basis for businesses to tokenize securities – first bonds, and later stocks. But that was just the strategy – so far, not much has happened.
We know though that the government is indeed working on a draft for said law, it’s just that things take a little more time than expected – sounds familiar? The draft is now with the German Ministry of Justice, where it’s been held up for the past weeks. According to Ministry representatives, the reason for the delay is the “complexity” of the legal changes which involve a whole range of amendments to existing legislation.
Members of Parliament call for a faster pace
The German parliament is already getting impatient – it takes too long, which means Germany is falling behind. The Members of Parliament of the center-right wing party CDU/CSU have now addressed the need for urgency in a letter to the Ministry of Justice.
“The introduction of electronic debt obligations in civil law and the regulatory handling of crypto-tokens is a central and urgent concern of our coalition,” reads the letter. “Private businesses have already been waiting for the parliament to create a legal framework since the publication of the Blockchain Strategy in March 2019.”
They’re not wrong. Germany’s Blockchain Strategy has created significant buzz in the industry. While so far, Germany was not an option for many crypto businesses, the changes suggested in the new strategy have put Europe’s leading economy on the map.
The letter points out the urgency of the matter. Speed indeed is crucial, because technological progress is fast and current legislation is a roadblock to innovation, rather than supporting it. That’s why so many businesses from Germany have moved their operations to either Switzerland or Liechtenstein, where governments have done a better job of passing innovation-friendly regulations. Or as MP Thomas Heilmann puts it, “Other countries do not sleep.”
Germany wants to become a digital pioneer
Even though the new legislation takes more time than initially planned, Germany has achieved significant progress over the past year in terms of creating a crypto-friendly ecosystem. Since January 2020, banks are allowed to provide crypto trading and custody services and several legal initiatives are on the way. The country tries to position itself as a digital frontrunner.
“This, however, will not work, if legislation cannot keep up with the pace of digital change,” says Heilmann.
On the contrary to Liechtenstein, Germany is not going to introduce a Blockchain Act that provides a comprehensive legal framework for the technology. Instead, the government plans to step by step amend existing legislation to accommodate digital technologies – more similar to Switzerland’s approach.
A critical question is the legal classification of the term “crypto token.” Up to now, there is no clear definition of what a token is, what rights it contains and how it is being regulated. “Crypto-companies currently spend vast amounts of money on legal opinions,” says Heilmann. “This is the wrong way. Businesses have a right to legal clarity, and the German government must provide it.”
According to the Federal Ministry of Justice, the draft law is being worked on at full speed, but some civil law issues still need to be examined. Finance Minister Olaf Scholz most recently said that he expected a draft to be available in the first quarter.