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

See all articles by Ibrahim E. Sancak

Ibrahim E. Sancak

ZWIRN-Research Center/Ostfalia University of Applied Sciences

Date Written: November 3, 2021

Abstract

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

Sancak, Ibrahim E., Implications of Germany’s Electronic Securities Act for Supervisory Technology (November 3, 2021). Journal of International Banking Law and Regulation / Thomson Reuters - Sweet & Maxwell (Forthcoming), Available at SSRN: https://ssrn.com/abstract=3936211 or http://dx.doi.org/10.2139/ssrn.3936211

Ibrahim E. Sancak (Contact Author)

ZWIRN-Research Center/Ostfalia University of Applied Sciences ( email )

Germany

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