Implications of Germany’s Draft Electronic Securities Regulation for RegTech and SupTech

Abstract

This paper documents implications of Germany’s draft regulation on electronic securities for RegTech and SupTech. Regulation of electronic securities or a dematerialized system should not only serve the development of the private sector, FinTech and RegTech for regulatory compliance but also serve the public sector, namely support RegTech for regulators and SupTech for financial supervisors. Electronic securities have the potential to increase operational efficiency and accuracy both in compliance and supervision, namely, corporate governance, audit, and surveillance by deploying RegTech and SupTech systems. Digital transformation in the financial sector should include considerations in line with the digital finance requirements, such as closing the technology gap between the private and public sectors and managing asymmetric technology risks. Germany’s draft regulation is a strong signal for digital transformation in Germany; however, it does not foresee a fully dematerialized system, a prerequisite for well-designed RegTech and SupTech systems.