Digital Asset Consulting Services | Services

Crypto Fund Units

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With the introduction of the Electronic Securities Act (eWpG), electronic fund units can be issued in common funds (Sondervermögen). The physical securitization previously required in a global certificate issued by the central securities depository (CSD) no longer applies. According to section 12(2) of the eWpG in conjunction with section 4(6) of the eWpG, the registrar for electronic fund units is the central securities depository or, if explicitly authorized by the issuer, a custodian (also called custodian bank).

To further promote Germany as a fund location, the Regulation on Crypto Fund Units (KryptoFAV) opens up the possibility for providers of investment funds to issue units in common funds (Sondervermögen) as crypto fund units by registration in a crypto securities registrer based on distributed ledger technology (DLT). The registrar for crypto fund units in a crypto securities registrer is the depositary of the investment fund or a third party designated by the depositary licensed as a crypto securities registry.

The Luxembourg legislator has also formally laid the groundwork for using DLT-based registries for fund units. Thus, two of the most important jurisdictions for investment funds are sending a clear signal to the entire industry. Based on DLT, the European market will experience a digital transformation of the entire value chain within the fund industry.

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Overview electronic fund units
and crypto fund units

Electronic fund units

Issuance of electronic fund units (also for existing funds possible)

Elimination of global certificate and entry in an electronic central securities register

Technological basis

Electronic database
Use of DLT possible

Technological impact

Electronic issuance Electronic register

Registrar

Via central security depository (CSD) or custodian

Crypto fund units

Issuance of (tokenized) crypto fund units Issuance of a new DLT-based fund under the KryptoFAV, including a crypto securities register for crypto fund units

Technological basis

Use of DLT mandatory

Technological impact

Tokenized fund units DLT-based registry

Registrar

Depository as registrar or a third party designated by the depository licensed as a crypto securities registry

Illustrative target picture of the subscription
and redemption process

Advantages that can already
be realized today

Sustainable step towards the digitalization of fund unit processing

Legally secure basis through the Electronic Securities Act (eWpG) and the Regulation on Crypto Fund Units (KryptoFAV), which have already entered into force

Easy to implement immediately for existing funds and for new funds to be issued

Cost savings due to elimination of the global certificate

Future potentials of crypto fund units

The use case lays the digital foundation for new innovative distribution channels e.g., via token trading venues (crypto exchanges)

High innovation potential and increase in attractiveness of investment funds for younger (retail) customers through tokenized issuance

Automation of various existing processes (e.g., calculation of withholding tax and commissions) through smart contracts

What are the next steps for you?

1.
Subscription and redemption process

Analysis of existing processes and involved systems of the subscription and redemption process, incl. interfaces and time dependencies

2.
Derivation of target process

Analysis of the procedural changes from the introduction of electronic fund units/crypto fund units and development of a target operating model

3.
Strategic options
(make or buy)

Target operating model options: 1. in-house development 2. outsourcing of crypto securities registry 3. use of a software-as-a-service (SaaS)

4.
Preparation for implementation

Planning of implementation activities, incl. cost estimation of different expansion stages of the application scenario

More Offerings

Crypto Custody

Entry point to new services and products in the new world of digital assets.

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DLT Pilot Regime

Go beyond the proof-of-concept level and develop DLT use cases in a secure regulatory environment in the EU.

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Download our flyer on crypto securities registry for asset managers & custodians for free

How can asset managers & custodians benefit from crypto securities registry?

We offer a modular procedure model for the implementation of digital fund units.

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