The Framework of the Future Financing Act

[vc_row][vc_column][vc_column_text]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.[/vc_column_text][/vc_column][/vc_row]