Germany is looking to modernize its capital market via the issuance of electronic securities on a blockchain platform.
In an interesting development, the government of Germany is taking a blockchain-based route for the regulation of startups that are working for financial innovation. Earlier this week on April 5, Germany’s finance ministry drafted legislation dubbed the “Future Finance Act”. Some of the key goals of the legislation include the digitization of capital markets via the issuance of electronic securities on a blockchain platform. Besides, the legislation also talks of the improved portability of crypto assets.
Electronic Securities on Blockchain
The translated version of the draft bill reads that Germany’s “capital market should become more modern and efficient in order to mobilize more private capital for future investments”. With this, the government’s target is to create a favorable environment for startups and investors in the country. Furthermore, the legislation makes key changes while reducing the barrier to entry for companies and investors.
The recent legislation reduces the minimum market capital required for initial public offerings (IPOs) from 1.25 million euros ($1.37 million) to 1 million euros ($1.1 million). Furthermore, it also allows investments by institutional players in small businesses, startups, as well as special purpose acquisition companies (SPACs).
As per the local media report, these new rules would be applicable to companies with less than 500 employees and revenues up to 100 million euros ($109 million). Additionally, the government seeks to extend the threshold period from two to seven years. As per the local publication, “Start-ups that were not founded a maximum of twelve years before the investment date, as was previously the case, will also benefit”.
Boosting Financial Innovation in Germany
The German government is looking for ways to push the growth of financial innovation in the country. In a statement, German finance minister Christian Lindner said:
“We want to make Germany the leading location for startups and growth companies. That is why we are improving access to the capital market and making it easier to raise equity. Small and medium-sized companies will also benefit from this.”
The government believes that the move would make Germany more attractive to investors while promoting a culture of stock market investments. “Startups, growth companies, and small and medium-sized companies should have easier access to the capital market,” the minister said.
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