German Electronic Securities Act and Fund Implications

Germany’s Electronic Securities Act: Legal Foundation for Tokenized Fund Shares

The German Electronic Securities Act (Gesetz uber elektronische Wertpapiere — eWpG), which entered into force on June 10, 2021, represents one of the most significant legislative innovations in European securities law. By enabling the issuance of electronic securities — including crypto securities issued on distributed ledgers — without requiring physical certificates or entries in traditional central securities depositories, the eWpG removes the legal barriers to tokenized fund share issuance in Germany.

Legislative Framework

The eWpG establishes two categories of electronic securities:

Central register securities (Zentralregisterwertpapiere): Electronic securities registered in a central register maintained by a CSD or similar entity. These are functionally equivalent to existing dematerialized securities.

Crypto securities (Kryptowertpapiere): Electronic securities registered on a crypto securities register maintained on a distributed ledger. This category enables blockchain-native securities issuance with full legal recognition.

For fund products, the eWpG was amended in June 2022 to extend its scope to fund shares (Fondsanteile), including shares of UCITS and AIFs governed by the German Investment Code (Kapitalanlagegesetzbuch — KAGB). This amendment enables German-domiciled funds to issue shares as crypto securities on distributed ledgers, with the same legal effect as traditional fund shares.

BaFin Supervision

BaFin supervises the issuance and registration of crypto securities, including tokenized fund shares. Entities maintaining crypto securities registers must obtain BaFin authorization, which requires: minimum capital of EUR 730,000; organizational requirements including IT security and business continuity; and compliance with AML requirements.

BaFin’s crypto securities register authorization has been obtained by several entities, including: Cashlink Technologies (Frankfurt), Finexity (Hamburg), and Tangany (Munich). These authorized register keepers provide the infrastructure for tokenized fund share issuance in Germany.

BaFin’s supervisory approach complements the eWpG’s legislative framework by establishing operational standards that register keepers must satisfy. These standards address smart contract security (requiring independent audit), key management (requiring multi-signature authorization), and disaster recovery (requiring the ability to reconstruct the register from off-chain backups). BaFin’s core principle is technological neutrality — tokenized financial instruments remain regulated by MiFID II regardless of the technology used. In March 2025, BaFin revised its AML guidance for CASPs and ART issuers, and published the Financial Market Digitalisation Act on December 27, 2024, reinforcing the regulatory infrastructure for digital securities. BaFin also increased due diligence requirements for crypto-asset transfers involving self-hosted addresses.

Fund Industry Application

German fund managers (Kapitalverwaltungsgesellschaften — KVGen) subject to BaFin supervision may issue tokenized fund shares using the eWpG framework. Several German fund managers have launched pilot programs:

DWS Group: Europe’s largest asset manager by German fund assets, DWS has piloted tokenized share issuance for institutional money market funds, targeting corporate treasury management use cases.

Universal Investment: Germany’s largest independent fund platform (EUR 550 billion in assets) has developed DLT integration for its fund administration platform, enabling tokenized share issuance for funds administered through its systems.

The practical implementation requires coordination between the KVG (fund manager), the depositary bank, the transfer agent, and the crypto securities register keeper. The eWpG does not eliminate the need for traditional fund service providers; it adds DLT as an additional distribution and registration layer.

Cross-Border Implications

German-domiciled funds with tokenized shares face cross-border distribution challenges. While the eWpG provides legal recognition within Germany, tokenized fund shares distributed to investors in other EU member states require legal recognition under the host state’s securities law. The EU-wide harmonization through MiCA and the UCITS passport partially address this challenge, but gaps remain for fund share transfer and settlement across jurisdictions.

The interaction between Germany’s eWpG framework and Luxembourg’s blockchain legislation creates opportunities for cross-border tokenized fund structures — for example, a Luxembourg-domiciled UCITS with a German-registered crypto securities share class. These structures leverage both jurisdictions’ legal frameworks to maximize distribution reach and operational efficiency.

Deutsche Borse Digital Asset Infrastructure

Deutsche Borse Group, which operates Germany’s principal exchanges and post-trade infrastructure, has developed a comprehensive digital asset infrastructure that supports tokenized fund operations under the eWpG framework:

D7 Digital Post-Trade Platform: D7 provides digital issuance and lifecycle management for securities, including crypto securities under the eWpG. D7 enables fund managers to issue tokenized fund shares with automated regulatory compliance, lifecycle event processing (distributions, corporate actions), and integration with traditional CSD settlement through Clearstream.

Crypto Finance AG: Acquired by Deutsche Borse in 2022, Crypto Finance provides institutional-grade crypto asset trading, custody, and brokerage services. For tokenized fund products, Crypto Finance’s custody infrastructure supports the safekeeping of tokenized fund shares and underlying digital assets, meeting BaFin’s operational standards.

Clearstream DLT Settlement: Clearstream, Deutsche Borse’s international CSD, is developing DLT-based settlement capabilities that could support tokenized fund share settlement alongside traditional CSD settlement. Clearstream’s D7 integration enables seamless issuance and settlement of eWpG crypto securities, including tokenized fund shares.

The combination of D7, Crypto Finance, and Clearstream’s DLT capabilities creates an end-to-end infrastructure for tokenized fund products — from issuance through trading and settlement — all within the Deutsche Borse regulated ecosystem.

Impact on European ETF Market

Germany’s eWpG framework has specific implications for the EUR 2.1 trillion European ETF market:

Xetra crypto ETP precedent: Deutsche Borse’s Xetra platform already lists over 100 crypto exchange-traded products, demonstrating that German exchange infrastructure can accommodate digital asset-linked products. Extending this capability to tokenized ETF shares — where the ETF shares themselves are crypto securities — is a natural evolution.

ETF issuer interest: Major European ETF issuers with German operations — including DWS (Deutsche Bank’s asset management arm), Xtrackers, and Amundi’s German subsidiary — have evaluated tokenized ETF share issuance under the eWpG framework. These issuers are attracted by: the explicit legal authority for tokenized share issuance; the established crypto securities registrar ecosystem; and integration with Deutsche Borse’s digital post-trade infrastructure.

Settlement efficiency: For ETFs listed on Xetra, settlement currently occurs through Clearstream on a T+2 basis (with plans to move to T+1 aligned with the US). Tokenized ETF shares settled through DLT infrastructure could achieve T+0 or atomic settlement, reducing authorized participant capital requirements and improving arbitrage efficiency.

Regulatory Interaction with EU Frameworks

The eWpG’s interaction with EU-level regulation creates a layered compliance environment:

MiCA compatibility: Crypto securities registrars must assess whether their activities fall within MiCA’s CASP authorization requirements in addition to their eWpG BaFin authorization. For entities providing both register-keeping and custody services, dual authorization may be required.

DLT Pilot Regime integration: eWpG crypto securities can be admitted to DLT trading facilities authorized under the Pilot Regime, enabling secondary market trading of tokenized fund shares on regulated DLT infrastructure. This integration leverages Germany’s national framework within the EU Pilot Regime’s cross-border scope.

UCITS compatibility: German UCITS (OGAW) funds issuing tokenized shares under the eWpG must satisfy both KAGB requirements and ESMA’s UCITS guidance. The CSSF (Luxembourg) and CBI (Ireland) recognize German-registered crypto securities for cross-border UCITS distribution, enabling tokenized fund shares issued in Germany to be distributed throughout the EU single market.

Comparison with Swiss DLT Act

Germany’s eWpG is frequently compared with Switzerland’s DLT Act, as both represent comprehensive legislative approaches to tokenized securities regulation in German-speaking jurisdictions. Key differences include:

• Scope: The Swiss DLT Act amended ten federal laws and created new DLT trading facility authorization categories. The eWpG is narrower, focusing on electronic securities registration without creating new market infrastructure categories.
• Market infrastructure: Switzerland’s SIX Digital Exchange (SDX) operates as an integrated DLT trading and settlement system. Germany relies on existing exchange infrastructure (Xetra) supplemented by Deutsche Borse’s digital asset platforms.
• Fund application: Switzerland permits fund shares to be issued as ledger-based securities under the Code of Obligations. Germany permits fund shares as crypto securities under the eWpG, with BaFin authorization required for register keepers.

eWpG Register Keeper Ecosystem and Institutional Readiness

The eWpG’s requirement for BaFin-authorized crypto securities registrars has produced a growing ecosystem of licensed infrastructure providers supporting tokenized fund share issuance. Beyond the initial licensees — Cashlink Technologies, Finexity, and Tangany — additional entities have obtained or applied for BaFin registrar authorization, including Deutsche Borse’s D7 platform (which obtained authorization in 2023) and several bank-affiliated digital asset subsidiaries.

The institutional readiness for tokenized fund products in Germany extends beyond registrar licensing. Deutsche Borse’s integrated digital asset infrastructure — spanning D7 for issuance, Crypto Finance for trading, and Clearstream for settlement — provides a complete lifecycle solution for eWpG crypto securities. For tokenized fund shares specifically, this infrastructure enables fund managers to issue shares through D7, facilitate secondary trading through Crypto Finance’s institutional platform, and settle transactions through Clearstream’s DLT-enabled settlement capabilities. The D7 platform has processed over EUR 20 billion in digital securities issuance since launch, demonstrating production-scale capabilities that extend naturally to tokenized fund share issuance.

German depositary banks — including BNP Paribas Securities Services (Frankfurt), CACEIS Bank Germany, and State Street Bank GmbH — have developed digital asset oversight capabilities to satisfy their UCITS and AIFMD depositary obligations for tokenized fund products. These capabilities include blockchain node access for on-chain register verification, smart contract monitoring for compliance with fund rules, and digital asset reconciliation systems that compare on-chain token balances with the depositary’s independent shareholder records. The depositary ecosystem’s readiness reduces operational barriers for German fund managers considering tokenized share class issuance under the eWpG.

MiCA and DORA Compliance for eWpG Participants

MiCA’s full enforcement in July 2026 creates dual-authorization requirements for crypto securities registrars and custodians operating under the eWpG. Entities providing custody for tokenized fund shares must hold both a BaFin crypto securities registrar license (under the eWpG) and MiCA CASP authorization (for crypto-asset custody services). The AMF and CSSF face similar dual-authorization challenges for their national DLT frameworks, but Germany’s more extensive crypto licensing regime creates particular complexity.

DORA’s operational resilience requirements, applicable from January 2025, impose additional obligations on all financial entities operating eWpG infrastructure. Crypto securities registrars must implement ICT risk management frameworks covering their DLT platforms, establish incident reporting procedures for blockchain-related disruptions, and manage concentration risk arising from dependence on specific blockchain networks. ESMA’s DORA implementing standards provide the baseline requirements, with BaFin publishing additional national guidance through its supervisory practice communications.

The DWS/Galaxy partnership represents the most significant institutional commitment to bringing tokenized fund products to market under the eWpG framework. DWS, managing approximately EUR 900 billion in assets, partnered with Galaxy Digital to develop tokenized fund products combining DWS’s fund management expertise with Galaxy’s crypto infrastructure. This partnership could produce the first institutional-scale tokenized ETF on Xetra, demonstrating the eWpG’s viability for mainstream fund tokenization.

Settlement Infrastructure and Deutsche Borse D7 Integration

Deutsche Borse’s D7 post-trade platform has emerged as the primary institutional infrastructure for eWpG crypto securities lifecycle management. D7 supports digital issuance, custody, and settlement of crypto securities — including tokenized fund shares — with full integration into Clearstream’s international CSD operations. As of Q1 2026, D7 has processed over EUR 20 billion in cumulative digital securities issuance, establishing production-scale operational credibility.

For tokenized fund share settlement specifically, D7 enables automated lifecycle event processing including dividend distributions, corporate actions, and share class conversions. The platform’s integration with Clearstream’s existing settlement infrastructure provides interoperability between tokenized and traditional fund share classes — enabling institutional investors to hold both share types within a single Clearstream account, with unified reporting and custody services.

D7’s planned integration with the ECB’s wholesale CBDC trigger solution would enable tokenized fund share settlement against central bank money, providing the highest credit quality settlement available for German-domiciled tokenized fund products. This integration aligns with the ECB’s wholesale CBDC fund settlement trials and positions Deutsche Borse’s infrastructure as a comprehensive solution for institutional tokenized fund operations within the eurozone.

For fund sponsors evaluating German domiciliation, the eWpG provides strong legal certainty for tokenized fund share issuance, supported by a maturing ecosystem of crypto securities registrars and integrated Deutsche Borse infrastructure. The fund manager blockchain platform evaluation guide examines German infrastructure options alongside alternatives in other jurisdictions. The smart contract audit guide covers BaFin’s smart contract security expectations. The SEC vs. ESMA comparison positions the eWpG within the broader EU-US regulatory landscape.

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