Securities Regulation | Germany Issues Bonds Using Blockchain, US SEC Tightens Custodian Qualifications

German technology pioneer Siemens recently issued 60 million euros worth of bonds using blockchain technology under Germany's electronic securities law, bypassing existing central securities depositories. Meanwhile, the United States is tightening its grip on regulating various aspects of cryptocurrencies. According to Bloomberg, the U.S. Securities and Exchange Commission (SEC) is planning to propose rule changes on Wednesday that would make it harder for cryptocurrency companies to become "qualified custodians," potentially making it more difficult for hedge funds, private equity firms, and pension funds to collaborate with cryptocurrency companies.

Germany: Siemens Issues Bonds Using Blockchain Technology

In mid-2021, Germany passed the Electronic Securities Act (Gesetz über elektronische Wertpapiere, eWpG), allowing the issuance of electronic securities, including encrypted securities based on blockchain technology. The core of the new regulation is the abandonment of paper-based securities documents, which can now be directly entered into electronic securities registers. To maintain legal certainty for securities acquisition and transfer developed in practice and theory over decades, electronic securities will be legally equivalent to securities that are securitized in document form.

Siemens, utilizing the Electronic Securities Act, sold bonds directly to investors, bypassing existing central securities depositories. However, as digital euros are not yet available for transactions, payments are still made through traditional bank transfers. The bond has a size of 60 million euros and a maturity of one year.

United States: SEC Tightens Custodian Qualifications

While Europe is adopting blockchain technology to replace custodial intermediaries, the United States is tightening regulations on various aspects of cryptocurrency. According to a report by Bloomberg, the U.S. Securities and Exchange Commission (SEC) plans to propose rule changes on Wednesday that will make it harder for cryptocurrency companies to become "qualified custodians," making it more difficult for hedge funds, private equity firms, and pension funds to work with crypto companies.

Hedge funds, some venture capital funds, and pension funds must use qualified custodians to hold their clients' assets. If this proposal is finalized, institutions with cryptocurrency funds may have to move their clients' assets elsewhere, potentially facing related audit issues. Furthermore, holding crypto assets may become more challenging for these funds.

Additional Information:

• The U.S. White House opposes pension funds adopting cryptocurrency
• SEC declares crypto assets as a priority regulatory focus, cryptocurrency advisors and exchanges need to be cautious!