Implications of Germany’s Electronic Securities Act for Supervisory Technology
Journal of International Banking Law and Regulation / Thomson Reuters - Sweet & Maxwell (Forthcoming)
15 Pages Posted: 18 Nov 2021
Date Written: November 3, 2021
Digital transformation requires a holistic approach; every step in a transformation should ultimately contribute to a big picture reflecting an acceptable balance among digital blocks and pixels. Digitalization of financial securities is one of the main building blocks of such transformation. In June 2021, Germany has transcended its conservative securities hinterland by breaking its chains in the paper-based securities realm and strategically anchored in blockchain domains with a new statute, the Electronic Securities Act. Although the act profoundly reforms the German securities industry by introducing a regulated territory for digital securities, its dematerialization rules cause a dual system: digital and paper-based securities can be issued or circulating together, doubling the workloads and challenges of financial supervisors in collecting consolidated (real-time) data and managing (near real-time) market surveillance. Considering the strategic risk management role of supervisory technology (SupTech), we conclude that digital transformation efforts with limited SupTech considerations do not help eliminate asymmetric technology risks and leave markets vulnerable to frauds and failures.
Keywords: Asymmetric Technology, Blockchain, Crypto Asset, Crypto Securities, Decentralized Finance, DeFi, Dematerialization, Digitalization, Digital Financial Asset, Digital Transformation, Distributed Ledger Technology, DLT, Electronic Markets, Electronic Securities, FinTech, RegTech, SupTech
JEL Classification: G10, G18, G28, G32, G38, K20, O31, O38
Suggested Citation: Suggested Citation