Germany -- Securities Classification Regulatory Overview

Germany classifies cryptocurrency tokens as securities based on a case-by-case assessment of their functional characteristics rather than a single unified legal test comparable to the Howey test[6].

Legal Classification Framework

Core Criteria for Securities Classification

German regulators determine whether a token qualifies as a security using these key criteria[4][7]:

• The token must be standardized and transferable
• It must be tradable on capital markets
• The rights it represents must be comparable to traditional securities (such as shares, bonds, or certificates)[4]

The classification occurs under multiple frameworks depending on the token's design[3]:

• EU Prospectus Regulation (EU 2017/1129) and German Securities Prospectus Act (WpPG)
• German Securities Trading Act (WpHG)
• German Banking Act (KWG) as financial instruments
• German Investment Firm Act (WpIG)

Regulatory Authority

BaFin (the German Financial Supervisory Authority) determines token classification on a case-by-case basis[6], evaluating whether tokens constitute financial instruments or securities under the applicable legislation.

Token Types and Security Classification

Security Tokens (Classified as Securities)

Security tokens convey membership rights or contractual claims with asset-like contents comparable to shareholder or debt security holder rights[2]. Examples include tokenized bonds and equity tokens[5]. BaFin classifies these tokens as securities requiring compliance with the EU Prospectus Regulation and WpPG[2].

Utility Tokens (Not Classified as Securities)

Utility tokens (app tokens or usage tokens) provide access to services and products similar to vouchers[2]. These are not classified as securities under the WpPG or German Investment Products Act (VermAnlG), regardless of how they are issued[2].

Non-Fungible Tokens (NFTs)

NFTs are typically not qualified as securities because they lack sufficient standardization and cannot be traded on capital markets like securities[8]. However, BaFin evaluates NFTs case-by-case and may classify them as asset investments under the German Asset Investment Act in some cases[8].

Crypto Securities Under eWpG

The Act on Electronic Securities (eWpG), which entered force on June 10, 2021, created a new category of "crypto securities" that must be registered in a crypto securities register[3][5]. Currently, the eWpG covers only digital bonds as a test phase[1]. Once registered, crypto securities are treated as tangible assets and fall under German securities law (WpPG, WpHG, and KWG)[3][7].

Registration and Issuance Requirements

Prospectus Requirements

Security tokens classified as securities require a prospectus under the EU Prospectus Regulation and WpPG before issuance[2]. Token issuers must comply with all applicable securities laws once their tokens are classified as securities[6].

Crypto Securities Registration

For tokens to qualify as crypto securities under the eWpG, they must be entered in a crypto securities register[3]. Only tokens registered this way are considered crypto securities under supervisory law[3].

Financial Service Authorization

Regulatory authorizations are required in Germany for commercial services related to tokens classified as crypto assets or financial instruments[5].

Secondary Trading Rules

Tokens classified as securities must meet the transferability and tradability requirements[7]. Security tokens must be tradable on financial markets to qualify as securities under the WpHG[7]. Once registered as crypto securities under the eWpG, they can be transferred by way of transfer of title, making good faith acquisitions possible[7].

Enforcement and Administrative Practice

BaFin bases its classification assessments on statutory criteria under securities supervision and determines whether tokens constitute regulated instruments[6]. The agency applies consistent administrative procedures when classifying tokens, as reflected in its published guidance on utility tokens, security tokens, and other crypto token types[2].

The search results do not provide specific enforcement examples or publicly available regulatory guidance URLs beyond those referenced in the source documents themselves.