The German Federal financial services Supervisory authority, BaFin, has this question in a journal article accepted. The authority has noted a “paradigm shift” as a result of the Tokenization of assets in the form of a Security Token.
What is an asset?
The capital investment act, the BaFin in the article refers to, defines an asset as
- Shares, the grant participation in the earnings of a company
- Shares in assets of the Issuer or a third party holds in its own name for the account of third parties, or managed (fiduciary assets)
- shareholder loan (participation loan)
- Subordinated loans
- Profit-sharing rights
- Registered bonds
- other investments, payment of interest and repayment, or assets cash in exchange for the temporary Provision of money grant or the prospect of
Security Token as a separate class of securities
BaFin notes must be considered that the Token values as the digitized Form of assets as a separate category of securities. This applies also if the tokenized financial instrument an asset.
Is a financial instrument in terms of content as an asset in accordance with § 1, paragraph 2, the capital investment act [investment law] configured, or referred to, in the Form of a freely transferable and tradable Tokens […] be digitized, the result is not an asset within the meaning of the capital investment act, but a securities […] This, at least when the Instrument equity-related or membership rights or assets even legal guilt of a legal nature .
In the case of security is, according to the securities prospectus act to:
- a) shares and other securities, the shares or interests in corporations or other legal entities are comparable, as well as certificates representing shares
- b) debt securities, in particular bonds and certificates other than those specified in point a) above, the securities represented
- c) all other securities that entitle the holder to the purchase or sale of such securities or to rise to a cash settlement determined by reference transferable securities, currencies, interest rates or yields, commodities or other indices or measures
Now most of the Token or crypto can be currencies transferred due to their technical nature is particularly good. Also the ability to trade on the financial market – because Bitcoin exchanges count as BaFin is the financial market. What is different currencies Security Token Utility’s Token, and Crypto, so the securities-like claims, they represent.
Example Bitbond: Germany’s first Security Token Offering
Based on these criteria, does not understand why the BaFin considers, for example, Bitcoin as investment. Transferable? Check. Tradable? But Hello. However, you can acquire Bitcoin claims, for example on a return or have a say in a company? No.
It is different with the Token “BB1” of the company Bitbond. This downgraded the BaFin as the value of paper – a precedent in the German regulatory history. The underlying financial instrument, i.e. what is tokenized, is a registered bond (the bond). Such a not really fall under the Definition of investment and not apply as the value of paper – there is no free trading. This reached Bitbond, however, by the Form of goss, the bond in Token:
The underlying Instrument was originally as the Name of bond, so as an investment, designed and would be the capital investment act . By the Transfer on the Blockchain, however, was increased the ability to trade on the financial market. The tokenized investment was classified as investment sui generis [of its own] […],
it is said in the article.
Advantages for issuers and investors
For the Issuer – in this case, Bitbond – caused by, among other things, the advantage that the fault does not require a prescription without the usual securitisation in the Form of a physical certificate. The proof of ownership is done via the Token and requires no paper. This, in turn, means that Intermediaries such as Clearstream, a Luxembourg-based international Depository for securities and a full subsidiary of Deutsche Börse AG.
Fewer middlemen mean more streamlined processes and more streamlined processes mean one thing: lower cost. Of the cost-saving benefit, however, the investors, because you need to purchase a Security Token is not a custodian Bank, which in turn fees required; for a Wallet.
Other STOs in sight
BaFin speaks with regard to the Tokenization of the assets of a “paradigm shift” – and reveals that she is currently reviewing a number of other prospectuses, other Security Token Offerings. Bitbond has made with the help of tokenization, the beginning. You may now be curious as to what assets land and equipment next on the Blockchain – the blessing of the highest German financial regulatory authority provided.