Why we need evolutionary, not revolutionary, regulatory initiatives

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This July, Luxembourg — the world’s second-largest domicile for investment funds behind the United States — submitted a draft law updating a law from March 1, 2019 that allowed for the registration and transfer of securities by custodians. With this draft law, issuance itself can be based on distributed ledger technology, thereby introducing truly dematerialized DLT or blockchain-based securities.Furthermore, a central “issuance account” keeper (transfer agent) is required to assume responsibility, and the account keeper has to be authorized by any member state of the European Economic Area, which means that non-Luxembourg credit institutions and investment firms can be the central account holder.Two weeks later, on Aug. 11, Germany’s Federal Ministry of Finance and its Federal Ministry of Justice and Consumer Protection submitted a draft bill for the introduction of electronic securities. The bill intends to revamp both Germany’s securities law and the corresponding supervisory law, with a focus on blockchain strategy.The draft differentiates between the keeping of a central electronic securities register by a central securities depository and the keeping of registers for issuing electronic bonds made possible by distributed ledger technologies. It also provides greater regulatory clarity: The Federal Financial Supervisory Authority will track the launch and …

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