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The Frame­work of the Future Financ­ing Act

Ger­many’s answer to the bear market!

The Ger­man Fed­er­al Min­istry of Finance and the Fed­er­al Min­istry of Jus­tice are join­ing forces to strength­en Ger­many’s posi­tion as a finan­cial cen­ter and to fuel the appetite of investors to put mon­ey into the econ­o­my. New reg­u­la­tion regard­ing the tax­a­tion of stocks, new legal invest­ment struc­tures and the pos­si­bil­i­ty of tok­enized equi­ty will help the Ger­man econ­o­my to offer com­pet­i­tive advan­tages over oth­er jurisdictions. 

 

In the last few weeks, it became abun­dant­ly clear that the col­lapse of tra­di­tion­al finance is caus­ing more busi­ness­es to eval­u­ate new ways to finance their oper­a­tions in times of cri­sis. The Ger­man Reg­u­la­tor is there­fore plan­ning to imple­ment a mul­ti­tude of reg­u­la­to­ry changes.

In this con­text, reg­u­la­tors are tak­ing a bilat­er­al approach by intro­duc­ing mea­sures to facil­i­tate cap­i­tal mar­ket access for com­pa­nies and by mak­ing equi­ty and asset invest­ments more attrac­tive for investors.

 

Ger­many is aim­ing to adapt mod­ern forms of financ­ing, such as naked war­rants and SPACs (Spe­cial Pur­pose Acqui­si­tion Com­pa­nies). If you’d like to go down this rab­bit hole and learn more about the mod­ern inter­pre­ta­tion of SPACs, check out our last arti­cle about Tok­enized SPACs!

 

Com­pared to oth­er wealthy coun­tries, Ger­many does not have as strong of a retail investor base as one might expect. This has been large­ly attrib­ut­able to German´s risk aver­sion and unfa­vor­able reg­u­la­tions that have been in place. In an effort to alle­vi­ate these afore­men­tioned fac­tors which are damp­en­ing the domes­tic invest­ment appetite and mar­ket, a new tax exemp­tion relat­ed to cap­i­tal gains tax from the dis­pos­al of stocks and equi­ty fund shares will be imple­ment­ed. Also, the thresh­old for the tax-free amount of employ­ee shares will be increased.

 

The intro­duc­tion of dual class shares to help high-growth com­pa­nies and start-ups, as well as improv­ing the legal frame­work for equi­ty cap­i­tal fundrais­ing will strength­en the Ger­man finan­cial market.

 

Now we final­ly come to the most inter­est­ing part, at least in our opin­ion: Tokenization! 

To take full advan­tage of the tok­eniza­tion of real world assets, it is cru­cial to get rid of old habits (such as the manda­to­ry use of paper). The Fed­er­al Min­istries stat­ed: “Mod­ern­iz­ing the cap­i­tal mar­ket also means dig­i­tiz­ing the cap­i­tal mar­ket. Dig­i­tiz­ing share trad­ing will enable us to take anoth­er impor­tant step toward mak­ing the cap­i­tal mar­ket more attrac­tive.” After the Ger­man super­vi­so­ry author­i­ty already intro­duced elec­tron­ic bonds last year, the pos­si­bil­i­ty of issu­ing elec­tron­ic shares is now to be imple­ment­ed as part of the Elec­tron­ic Secu­ri­ties Act (eWpG) in order to move clos­er to the goal of mod­ern­iz­ing, dig­i­tiz­ing and de-bureau­cratis­ing the finan­cial market.

 

This new frame­work is the next step to pre­pare Ger­many for the chal­lenges of a dig­i­tal­ized and tok­enized future.