It depends on where your bond will be held and traded. Listing on a trading venue or custody at investors' banks: the central register at a central securities depository fits. If investors subscribe directly through an issuance platform and the bond's lifecycle should run digitally in the register, the crypto securities register fits, with a register keeper licensed under Section 32 of the German Banking Act (KWG), even if you keep the register yourself. The basis is Sections 12 and 16 of the German Electronic Securities Act (eWpG).
The technology is not the deciding point
Many think a blockchain bond needs a crypto securities register. The eWpG sees it differently. Both registers create a full electronic security without a certificate.
The difference is the path to the investor: through central securities depository and custodian banks, or directly from the register into the subscribers' holdings. Choose by technology instead of distribution channel, and you often decide against your own investors. Changing a crypto security to another register later needs consent from all holders or the supervisory authority.
Two registers, one basic mechanism
The eWpG knows exactly two: central registers under Section 12 and crypto securities registers under Section 16 (Section 4 (2) and (3) eWpG). In both, you file the terms and conditions with the register keeper as an electronic document before entry (Section 5 (1) eWpG). No entry within three months, and the register keeper deletes them. Both allow collective entry via a central securities depository or custodian, and individual entry in the investor's name (Section 8 (1) eWpG).
Who keeps a central register
Either a central securities depository (Wertpapiersammelbank) or a custodian you expressly authorize in text form (Section 12 (2) eWpG). A central securities depository is one authorized under Article 16 of Regulation (EU) No 909/2014. A custodian is an institution licensed for the custody business (Section 4 (5) and (6) eWpG).
The difference matters. Only if a central securities depository keeps the register and is itself entered as holder is the security admitted to Effektengiro, the book-entry settlement through accounts at the depository on which exchange trading and bank custody are built (Section 12 (3) eWpG). A central register at a custodian without this link is electronic, but not automatically exchange-ready. The register keeper must notify the supervisory authority before the first entry (Section 12 (4) eWpG).
Who keeps a crypto securities register
The entity you name. If you name no one, you count as the register keeper yourself (Section 16 (2) eWpG). Keeping a crypto securities register is a financial service under Section 1 (1a) sentence 2 no. 8 KWG and needs a license under Section 32 (1) KWG. According to BaFin guidance notice 03/2023 of November 23, 2023, this also applies to an issuer keeping its own register.
The register must run on a tamper-proof recording system that logs data in time sequence and protects it against unauthorized deletion and later change (Section 16 (1) eWpG). Providing only blockchain hardware or software does not count as keeping a register. The register keeper is responsible for correct entries; you are liable for its errors only if you chose it without care. But you must fix defects in the register within a reasonable period, and the supervisory authority can then require transfer to another register (Section 21 eWpG).
How the two compare in practice
- Central register at a central securities depository: Effektengiro if the depository is entered as holder; trading venue possible; investors hold through an account at their own bank.
- Central register at a custodian: no Effektengiro under Section 12 (3); trading venue only after admission at the depository; investors hold through an account at the custodian.
- Crypto securities register: no Effektengiro under Section 12 (3), admission at the depository only on its terms; trading venue only through a DLT trading system under Regulation (EU) 2022/858 or after admission at the depository; investors hold through an account (collective entry) or their own register entry (individual entry); no bearer shares (Section 1 no. 3); a later change of register needs the consent of all holders or the supervisory authority (Section 22).
In both central register variants, bearer shares are allowed and a change of register follows the terms and conditions.
When the central register is the right choice
When the bond should trade on a trading venue or sit in investors' normal bank securities accounts. Transferable securities traded on a trading venue must be recorded in Effektengiro at a central securities depository by the settlement date at the latest (Article 3 (2) of Regulation (EU) No 909/2014).
Paying agent, securities identification number, custodian banks and settlement stay; only the global certificate goes. You can even convert an existing bond with a global certificate into a central register security at a central securities depository without consent (Section 6 (3) eWpG), if the depository is also registered as holder and the terms neither exclude this nor make it subject to consent.
When the crypto securities register is the right choice
When investors subscribe directly through an issuance platform and the bond is held off-exchange. With individual entry, the investor is in the register personally and needs no securities account (Section 8 (1) eWpG). Interest, repayment and transfers can then be coordinated using the register data.
The price comes in three parts:
- A licensed register keeper whose organization meets the eWpG and the Ordinance on Requirements for Electronic Securities Registers (eWpRV).
- No exchange trading through the central securities depository until the bond is admitted there.
- A commitment. Moving to another electronic securities register needs the consent of all holders or the supervisory authority (Section 22 eWpG). Changing the register keeper within the crypto securities register is possible without consent, unless the terms say otherwise (Section 16 (2) eWpG).
When this answer does not apply
It assumes your instrument falls under the eWpG: bearer bonds, registered shares and bearer shares, the latter only in a central register (Section 1 eWpG). Subordinated loans and profit participation rights without security character are outside it.
Nor does it apply to a DLT trading system under Regulation (EU) 2022/858. There, bonds below EUR 1 billion issue volume can trade without the classic depository chain, as long as all instruments admitted there stay at or below EUR 6 billion market value (Article 3 (1) and (2)). Then the operator's requirements decide the register.
Your next step
Decide how your investors will subscribe and hold the bond, then check which register follows. To discuss your project, contact us.