Digital Securities
Digital securities are shares, bonds and fund units that exist as an entry in an electronic register or on a distributed ledger instead of as a paper certificate. They remain securities under securities law, so the same prospectus, trading and custody rules apply as for a classic bond or share.
The Frankfurt School Blockchain Center listed digital securities as one of its research fields, next to crypto assets and tokenization. Banks and exchanges in Germany, Switzerland, the EU and the UK now issue, trade and settle such securities under laws written for them since 2021.
What are digital securities
A digital security can be issued digitally from the start, or it can be a token that represents a security held elsewhere. The first form replaces the paper certificate and the depository entry, while the second form, often called a tokenized security, adds a token to a security that still sits in a classic depository.
Digital securities are not crypto assets in the sense of MiCA, because MiCA excludes financial instruments. Their issuers need a prospectus or an exemption, and the platforms that trade them need a license as a trading venue or a settlement system.
Digital securities in Germany
The German Electronic Securities Act of June 2021 allows bonds and fund units, and since the Future Financing Act of December 2023 also shares, to be issued without a paper certificate. A central register security sits with a central securities depository, and a crypto security sits in a crypto securities register that a BaFin-licensed registrar keeps on a distributed ledger.
In February 2023 Siemens issued a digital bond of 60 million euros as a crypto security on the public blockchain Polygon. In August 2024 Berlin Hyp issued a Pfandbrief of 100 million euros on the private blockchain of SWIAT, with DekaBank as registrar.
Digital securities regulation in the EU
The DLT Pilot Regime has applied since 23 March 2023 and lets licensed market infrastructures trade and settle securities on distributed ledgers. It knows three types: a DLT multilateral trading facility, a DLT settlement system and a DLT trading and settlement system that combines both.
On 3 December 2024 BaFin gave 21X in Frankfurt the first EU license for a DLT trading and settlement system, which runs on Polygon. The EU Market Integration and Supervision Package of December 2025 proposes to raise the volume limits of the pilot regime.
Upcoming fintech and finance events in Europe
Digital Securities Sandbox in the UK
The Digital Securities Sandbox of the Bank of England and the Financial Conduct Authority started in 2024 under the Financial Services and Markets Act 2023 and runs for five years. Firms in the sandbox may run a trading venue and a securities depository with settlement in one legal entity, a form the sandbox calls a digital securities depository.
The sandbox covers shares, bonds and money market instruments, but it excludes derivatives and unbacked crypto assets such as bitcoin. Its results are meant to show which permanent rules the UK needs for digital securities after the five years.
Switzerland and settlement in central bank money
Switzerland introduced ledger-based securities with its DLT law in 2021, and SIX Digital Exchange runs a regulated exchange and central securities depository for them. Swiss banks have issued digital bonds there that settle against central bank money of the Swiss National Bank.
In the euro area the ECB plans to link DLT platforms to its TARGET payment system through the project Pontes. Without settlement in central bank money, digital securities still depend on bank money or stablecoins for the cash leg of a trade.
Digital securities and Finance Loop
Banks, issuers and asset managers in the Finance Loop network weigh when to move bonds and fund units onto a register or a ledger and which market infrastructure to use. Finance Loop brings their capital markets, operations and legal teams together with registrars, exchanges and supervisors, so they can compare issues that have already settled.
Finance Loop is a professional network and has the goal of driving the institutional use of emerging technologies in finance, such as AI, tokenization, stablecoins, and DeFi. Finance Loop helps its members build skills and personal networks in these fields: Investment & Digital Assets, Payments & Digital Money, Digital Infrastructure & Sovereignty, and Risk & Compliance.