The Law on Electronic Securities (eWpG) enables securities to be held without a document, decentralized on the basis of blockchain technology in a crypto-securities register. This innovation has the potential to disrupt the securities market with the right penetration of products and services. The Deka Digital Asset Monitor aims to continuously monitor the emergence of this market and evaluate its progress and challenges.

DekaBank is the securities house of the savings banks and, together with its subsidiaries, forms the Deka Group. Although securities settlement is already largely digitized today, blockchain-based representation offers great potential for traditional forms of securities. It can accelerate processes, make them more transparent and secure, and even significantly change the infrastructure of the market, according to the current conclusion of the Deka Digital Asset Monitor 2023.

The issuance volume of blockchain securities quadrupled in 2023. The Deka Digital Asset Monitor, which was developed in cooperation with the Frankfurt School Blockchain Center, intas.tech, and WM Datenservice as a data provider, focuses on blockchain-based digital assets according to eWpG. Modestly launched since the introduction of the law in June 2021, this sector experienced strong growth in 2023. If the activities are evaluated quarterly and an index value of 100 is used for the fourth quarter of 2021, in which the first issuances of blockchain-based securities took place, this digital asset index developed very positively last year and closed at a value of 300.

Both factors used to calculate the index – issuance volume and number of issuances – contributed to this development. The volume of all issued tokenized securities rose from EUR 31 million at the end of 2022 to approximately EUR 183 million at the end of 2023 – also thanks to a steadily increasing number of issuances. These almost quadrupled during the same period.

Bankhaus Metzler issues first tokenized fund share After almost exclusively issuing bond loans, a new product category was added last year: In September, Bankhaus Metzler issued the first tokenized fund share in the form of a public fund. Shortly afterwards, Deka Investment issued the A-Deka-BlockchainEINS, a tokenized special fund. Since the Future Financing Act (ZuFinG) came into force on December 14, 2023, the issuance of tokenized registered shares is now also possible.

As one of the first major financial institutions, DekaBank issued tokenized securities in 2021. After many smaller players, other major institutional market participants such as Deutsche Bank, Hauck Aufhäuser Lampe, and Bankhaus Metzler entered the market as issuers during the transition to 2023. Currently, ten financial institutions and technology providers are equipped with the necessary license for the management of crypto-securities registers and are actively driving development forward. We are currently still in a building phase, but the framework conditions for digital assets are improving all the time and are expected to lead to dynamic growth, according to Deka’s analysis of the current situation. Increasing regulatory clarity and the gradual establishment of market infrastructure promote and stabilize the development of the sector. For example, there are currently several initiatives to develop blockchain-based forms of money in order to raise this important transfer process to the blockchain and enable completely transparent real-time settlement. This is an important step in giving the market for digital assets further impetus.

The Digital Asset Index is an excellent indicator of the state of evolution in the field of tokenization. The monitor, developed by the Frankfurt School Blockchain Center, intas.tech, and Deka with WM Datenservice as a data provider, aims to map developments in the market for tokenized securities (crypto-securities according to eWpG) and make statements about its maturity. The Digital Asset Index is a calculation based on the two weighted main factors of number and volume of issuances.

This weighting best reflects the market maturity at the current time. The survey is based on data from WM Datenservice, the list of crypto-securities according to § 20 para. 3 eWpG published by the Federal Financial Supervisory Authority (BaFin), and the Federal Gazette published by the Federal Ministry of Justice.