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German State Announces Plan to Establish European Blockchain Institute

North Rhine-Westphalia has announced that it is founding the European Blockchain Institute in Dortmund later this year.

The government of the German state North Rhine-Westphalia (NRW) announced plans to establish the European Blockchain Institute to research blockchain technology in a press release on May 13.

According to NRW Economics Minister Andreas Pinkwart, the European Blockchain Institute will be founded in the city of Dortmund later this year, inside the Fraunhofer Institute for Material Flow and Logistics (IML).

The press release says that critics of blockchain have voiced concern over the amount of energy consumed by mining bitcoin (BTC). Pinkwart addressed these concerns and praised the benefits of blockchain tech, saying:

“This technology can be safe, decentralized, affordable and, when used properly, not too energy-intensive.”

According to the press release, Europe is behind the United States in blockchain advancements and “has to catch up,” which is a goal that NRW hopes to lead the way in achieving.

As reported by Cointelegraph, Ripple’s Director of Regulatory Relations Ryan Zagone commented at Consensus 2019 on the need for the U.S. to lead the way in implementing blockchain and crypto infrastructure:

“There is a broad discussion in Washington around 5G being dominated by foreign firms and the U.S. being reliant on foreign technology and foreign expertise… With blockchain and crypto, I think there’s a recognition now that these will be part of our future infrastructure… It’s important both for national security and from an economic perspective, that the U.S. is a leader in that.”

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A Small Bank in Germany Is Now Nearly 30% Owned by Crypto Companies

Almost 30 percent of the equity in WEG Bank AG, a previously obscure German bank focused on the real estate industry, is now owned by companies in the cryptocurrency industry, CoinDesk has learned.

By purchasing 9.9 percent of the bank, blockchain startup Nimiq now joins TokenPay and the Litecoin Foundation as part owners of the Munich-area financial institution. (Under German law, foreign ownership stakes of 10 percent or greater require additional regulatory approval.)

TokenPay became the first crypto company to acquire the bank’s equity in 2018, with Litecoin Foundation director Charlie Lee joining the bank’s board in a related move. Then WEG Bank enlisted Nimiq to help develop infrastructure for external crypto-to-fiat conversions for banking clients.

Nimiq raised roughly $12.8 million in a token sale in 2017 and, much like TokenPay, has invested its ICO funds in other assets as well, such as real estate and now equity.

Nimiq co-founder Elion Chin said in a statement:

“With Litecoin and Tokenpay as existing shareholders, new clients including [blockchain application platform] Lisk, and other key prospective partnerships, we believe WEG Bank is on the way to reinventing itself as a bank of the future.”

This cross-industry partnership could eventually offer fiat liquidity to decentralized exchange (DEX) users – if they pass the WEG Bank’s screening process.

These days, few DEXs can connect to institutional bank accounts for professional usage, unlike centralized exchange options. Meant to help facilitate the first DEX to WEG Bank AG transaction, the in-progress Nimiq system is scheduled for a limited launch by 2020. That said, WEG Bank AG will remain a traditional bank, never directly touching cryptocurrency.

“For the past 12 months, we have been looking at various ways to expand our core banking activities into the blockchain community,” WEG Bank AG CEO Matthias von Hauff said in a press statement about the effort in February. “With Nimiq, we have been able to develop not only a landmark payment interface which has the potential to revolutionize the way we deal with cryptocurrencies, but also an innovative and powerful partnership.”

For its part, Nimiq announced in a blog post that it would work with DEXs like Agora Trade to act as a “middleman to transfer funds between crypto markets and the traditional banking system,” charging a small percentage of transaction fees along the way. In return, the blog post says, Agora Trade will list Nimiq’s NIM tokens for cross-chain trades with ether and bitcoin without any exchange fees for NIM users.

Nimiq is also partnering with Binance-owned Trust Wallet, according to a recent blog post. The aim is to eventually give users across DEXs access to liquid euros for transactions made with bitcoin, ether or NIM through Nimiq’s upcoming “crypto-to-fiat bridge” called OASIS.

German money image via Shutterstock

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German Finance Ministry Calls for Regulated Blockchain Securities Market

The German Ministry of Finance has recommended that the country recognize blockchain-based securities as a legitimate form of financial instrument and regulate them as such.

In a paper published Friday, the agency said securities can be issued in electronic form and shouldn’t have to be documented on paper. “German law should generally be opened up for electronic securities, i.e. the currently mandatory documentary embodiment of securities (paper form) should no longer apply without restriction,” the paper said, according to a Google translation from German.

Legislation should create a framework for regulating these digital instruments, with the flexibility to adjust the rules to the quickly changing reality of blockchain tech, the ministry added. “In view of the fact that the technical standards and requirements can change rapidly, authorization should be provided to regulate the specific technical details by legal regulation.”

The initiative should start with electronic bonds, and only later move to digital shares, the government said, since the amount of regulation necessary for the latter would delay the timely introduction of any electronic securities. All such securities in the country should be registered in a single central registry administered by a government-supervised agency, the document goes on, “in order to avoid the possibility of manipulation,” the paper said.

Also, “separate regulations should be provided for the acquisition and transfer of electronic securities as well as good faith protection.” If digital securities are used to trade on the country’s trading venues they should be registered with the country’s central security depository (CSD), the ministry said. Retail investors should generally be able to buy tokenized securities only through an intermediary financial institution, the paper said.

Notably, the document said digital securities can utilize blockchain but do not necessarily have to:

“The use of blockchain technology should not be privileged, especially with regard to the state-of-the-art development of the sometimes high energy requirements of public blockchain technologies and their climatic effects.”

The paper also touches the matter of so-called utility tokens, contemplating that these might be exempt from the requirements placed on securities issuers.

“As a rule, utility tokens do not constitute securities, investments or other financial instruments under the German Securities Trading Act and in most cases will not be electronic bonds in the future,” although “it could be determined by law that a public offer of utility tokens may only take place if the provider has previously published an information sheet,” the document says.

Legislation on the way

The ministry’s recommendations come as a draft bill on security token offerings (STOs) is in the works at the German parliament.

“The technology sounds very interesting, but people don’t really understand it,” Senator Thomas Heilmann, a member of the Christian Democratic Union (CDU), Germany’s ruling political party, told CoinDesk, adding that the CDU faction in the parliament supports his initiative.

The bill now exists in the form of “discussion materials” and has been discussed by German lawmakers and government bodies behind closed doors, said Richard Lohwasser, the CEO of blockchain startup Lition, which has been advising Heilmann on the new legislative proposal.

As it stands, without comprehensive regulation of security tokens in Europe, dealing with them can mean a whole range of problems: holding a token doesn’t mean holding equity from a legal standpoint, dividend payments are not legally compliant, and if a token gets sold the buyer doesn’t acquire legal rights to receive dividends, Lohwasser explained.

As a financial center of Europe, Germany can secure also a leadership position in tokenized finance, the Finance Ministry’s document states. The country might also set the tone for the future E.U.-wide security token regulations.

The implications can be important for the global blockchain community, not only Germany, Lewis Cohen, a lawyer at the New York-based law firm DLx Law told CoinDesk, concluding:

“Even if the German capital markets are not that significant right now, especially from the point of view of companies here in the U.S., the fact that policymakers in Germany are taking active steps to encourage the use of security tokens will be noticed, and lessons will be learned, around the world. The German experiment, if you will, is important for creating a model, in which the wider blockchain community can learn what works well and what doesn’t work as well.”

German Finance Ministry headquarters image via Shutterstock.

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Germany’s 2nd Largest Stock Exchange Boerse Stuttgart Launches Crypto Trading App

Germany’s second largest stock exchange, Boerse Stuttgart Group, has launched an app that allows euro-crypto trading.

Germany’s second largest stock exchange, Boerse Stuttgart Group, has officially launched its crypto-trading app Bison, according to an official tweet today, Jan. 31.

According to the app’s webpage, the software was developed by FinTech Sowa Labs — a subsidiary of Boerse Stuttgart Digital Ventures. The developers’ reported aim in making the app is to ease access to cryptocurrencies for investors that are accustomed to using traditional markets.

Currently, the app enables free-of-charge trading in Bitcoin (BTC), Ethereum (ETH), Litecoin (LTC) and Ripple (XRP). Another subsidiary of the stock exchange, Blocknox, will act as custodian for users’ funds, using an escrow system, according to a press release published on Finextra today.

Boerse Stuttgart has also partnered with an external banking partner, SolarisBank, which will process euro payments and provide fiat custodial services, the press release notes.

During the initial period following its launch, Bison will be available only in Germany, and its services will work from 6:00 a.m. to 12:00 a.m. CET. However, the stock exchange giant clarified that it plans to eventually extend trading to 24 hours a day. Access for residents of other European countries will be added by late 2019, while support for more cryptocurrencies is also planned in future, according to the press release.

Bison was first announced by the stock exchange in May, 2018.

As Cointelegraph reported, stock market operators worldwide are interested in launching crypto-related services. For instance, the Stock Exchange of Thailand (SET) is planning to set up a regulated digital asset exchange. Hong Kong is also set to launch a digital assets exchange in Q1 2019, supported by the technology solutions provider for the London Stock Exchange Group.

The much-anticipated digital assets platform Bakkt, created by the operator of the New York Stock Exchange, recently completed a $182.5 million funding round. More recently, Bakkt announced key vacancies at the firm, mostly for senior developer positions.