Germany paves way for electronic securities to reap blockchain fruits

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BERLIN, Dec 16 (Reuters) - Chancellor Angela Merkel's cabinet on Wednesday passed new legislation to introduce all-electronic securities as part of its wider blockchain strategy, finance ministry said.

The law eases rules that until now had forced issuers and holders of securities to document transactions with a paper certificate.

"The paper certificate may be dear to some for nostalgic reasons, but the future belongs to its electronic version," Finance Minister Olaf Scholz said, adding that electronic securities cut costs and administrative burdens.

The paper certificate can now be replaced with an entry in a central securities depository or a register kept by private-sector banks. An entry in a crypto securities register based on blockchain technology is also possible.

Justice Minister Christine Lambrecht said the law would provide legal clarity and enhance the potential of the new technologies.

Blockchain technology is a kind of digital ledger in which all data on a transaction is stored in encrypted form. It is open to all users which provides a high degree of transparency.

The technology is considered to be forgery-proof. As every user manages a copy of the database, it is theoretically impossible to manipulate it unnoticed.

"Blockchain technology has the potential to turn current procedures completely upside down and to fundamentally change the way entire business sectors work," Achim Berg, head of the IT business association Bitkom said.

(Reporting by Michael Nienaber and Christian Kraemer; editing by Thomas Escritt)