FAQ

The straightforward answer: Nothing! The crypto stock is a fully regulated financial instrument and has nothing in common with the well-known cryptocurrencies. We consider regulatory compliance to be an essential feature of an effective financial instrument.

The crypto stock was introduced by the legislator through the Future Financing Act (ZuFinG). It exists as a digital share alongside the traditional share. The Stock Corporation Act (AktG) applies equally to both forms of share issuance.

The term was established by the legislator in the Electronic Securities Act (eWpG). Please refer to eWpG § 4 Definitions for details.

The blockchain used by ecrop is private-permissioned (i.e., not public) and relies on the Proof of Authority mechanism. Furthermore, the blockchain is employed in the technical solution architecture only where absolutely necessary. Therefore, it does not consume more energy than other SaaS solutions.

The ecrop crypto stock does not require issuers or investors to deal with the complex management of a blockchain wallet. The blockchain is a small part of our technical solution that users do not need to interact with.

The ecrop crypto stock is held in a private blockchain that is not externally accessible. The data can only be accessed by individuals with verifiable legitimate interest (e.g., holders of a crypto stock) through the ecrop crypto securities register.

A share is a financial instrument that represents ownership in a company. When you own a share, you are a shareholder or stakeholder in the company that issued the share. There are various types of shares, including common shares, preferred shares, and different classes of shares that can offer different rights and privileges to shareholders. Shares are a significant asset class and play a vital role in the world of finance and investing.

Common stocks grant shareholders voting rights and entitlement to profits, but they have lower priority for dividends and capital repayment compared to preferred stocks. Preferred stocks offer preferred dividends and repayment but typically have little to no voting rights and fewer opportunities for capital appreciation. Common stocks are riskier, while preferred stocks are safer but offer lower potential returns.

The voting right enables shareholders with common stock shares to participate in and vote at the annual general meeting. They can also issue proxies to allow others to vote on their behalf. The ecrop solution enables the full digital execution of the voting right at the virtual general meeting.

Multiple voting rights in companies allow founders or, for example, executives to maintain more influence and control over the company even if they hold only a small portion of the shares. This helps ensure long-term alignment and stability since founders can focus on their vision and growth strategies without being swayed by short-term interests. This structure also provides protection against hostile takeovers and can attract investor trust from those who support the founders and their long-term vision. Multiple voting rights can only be structured with crypto stocks. Traditional stocks do not allow for multiple voting rights.

Collective custody and individual custody are different approaches to the safekeeping of stocks. In collective custody, the stocks of multiple investors are stored in a common account at a central depository, with investors having claims to these stocks but not possessing them physically. In individual custody, investors receive physical certificates or electronic entries representing their individual ownership claims, and they have physical possession of their stocks. Traditional stocks are typically held in collective custody in most cases today.

The terms "holder" and "beneficial owner" pertain to the ownership of shares. Holders are the actual possessors of shares, either in physical or electronic form. They have voting rights and entitlement to dividends. On the other hand, beneficial owners are individuals or organizations that benefit economically from the shares, even if they are not in physical possession of the shares. This frequently occurs in institutional contexts where a central depository holds the shares on behalf of numerous investors who are considered beneficial owners.

Restricted shares are a special type of shares in which the shareholder requires the consent of the company or other shareholders to transfer or sell the shares. These restrictions are in place to maintain control of the company in the hands of existing shareholders and prevent unwanted takeovers. In other words, they limit the transferability of the shares and necessitate approvals before they can change ownership.

A stock register is a written record maintained by the stock corporation or a service provider, containing information about its shareholders and their shareholdings. It serves to identify shareholders, facilitates the execution of voting rights, aids in communication with shareholders, and ensures compliance with legal regulations. The register also assists in capital actions, share transfers, and dividend payouts, contributing to the transparency and accountability of the company.

Yes, maintaining a stock register for traditional shares entails additional administrative work for a stock corporation. This effort arises from the need to continuously record and update current information about shareholders and their stock ownership, communicate with shareholders, comply with legal requirements, and ensure security and data protection. During general meetings, the company must also ensure that voting rights are exercised correctly and keep reports and documents to meet legal requirements. Despite the effort, a properly maintained stock register is essential for organizing the relationship with shareholders and fulfilling legal obligations. Crypto shares can be maintained in the crypto securities register alongside the stock register, eliminating this additional workload.

Access to the stock register and the information contained therein is subject to applicable laws and regulations in various countries. In general, eligible shareholders have the right to access the register to obtain information about their own shares. Financial authorities, regulatory bodies, and the company itself also have access to the register for various purposes. The information in the stock register may include shareholder names, addresses, share quantities, share classes, transactions, restrictions, and dividend entitlements. In principle, the legitimate interest of the requesting party must be carefully examined before access is granted.

The information that must be available in the stock register includes the following details: Name and address of the shareholder Number of shares held Classes or types of shares Date of issuance of the shares Transactions and transfers of shares Restrictions or liens, if any Execution of voting rights and entitlement to dividends

Yes, you can involve your shareholders in marketing your products or services. This can be done through regular communication, special events, engagement platforms, and even special offers for shareholders. It's important to ensure that you comply with legal regulations and keep shareholders adequately informed to foster their loyalty and support. This engagement can help build a strong and positive relationship with your shareholders. The fully digital stock register connected to the crypto securities register provides a simple and modern way to go beyond the legal obligations in communication with shareholders.

Normally, a shareholder cannot refuse to be registered in a company's stock register, as being included in the register is a fundamental requirement for ownership and management of shares. Shareholders are typically legally obligated to provide information about their share ownership, and the company must maintain an accurate stock register to ensure compliance with regulations and laws. Refusing registration in the stock register could have legal consequences and would generally not be permissible in most cases. It's important to note that the stock register serves the purpose of documenting the ownership and rights of shareholders and ensuring that the company treats and informs shareholders appropriately. Therefore, shareholders should usually fulfill their obligations to provide information about their share ownership.

In Germany, the limited liability company ("GmbH") is still the most common form of business entity for startups and medium-sized enterprises. This is due to the higher administrative burden associated with traditional stock corporations, primarily stemming from the need to maintain a stock register and hold physical shareholder meetings. A crypto stock corporation can leverage modern technologies to better harness the advantages of the stock corporation structure. Advantages for Startups: Capital Acquisition for Growth: Startups aiming for rapid growth can benefit from the ability of a stock corporation to raise capital from a broad base of investors. Attractiveness to Venture Capital: Many venture capital investors prefer the stock corporation structure as it provides an easier way to raise capital and facilitate the exit process. Incentives for Employees: Stock options and employee participation plans are often more attractive in a stock corporation, offering greater flexibility for employee involvement. Advantages for medium-sized Enterprises: Growth and Expansion: The stock corporation structure makes it easier for medium-sized enterprises to raise capital for expansion and acquisitions. Long-Term Planning: A stock corporation can provide a better structure for long-term corporate planning and management, enabling a broader shareholder base and professional management. Business Succession: The transfer of shares can be more straightforward in a stock corporation, allowing medium-sized enterprises to implement organized succession planning.

A stock company has various rights and obligations towards its shareholders, which are legally defined. The most important rights of the company (AG) towards shareholders include: Capital Contribution: Shareholders are required to make the agreed-upon capital contributions and pay the outstanding amounts for their shares in accordance with the terms and deadlines. The capital contribution represents the committed equity of the shareholders and is used to finance the AG. Exercise of Voting Rights: Shareholders have the right to vote at general meetings, and with that right comes the duty to exercise their voting rights. Shareholders should actively participate in general meetings or grant proxy voting rights to have a say in corporate decisions. Responsibility for the Company: Shareholders bear a certain responsibility for the well-being of the AG. They should work towards the long-term health and growth of the company, rather than seeking only short-term gains. Compliance with Laws and Regulations: Shareholders are obligated to respect and adhere to applicable laws, regulations, and corporate documents. This includes compliance with transparency requirements and the avoidance of insider trading. Communication and Transparency: Shareholders should maintain open communication with the AG and other shareholders. This includes disclosing transactions and conflicts of interest.

A stock corporation has various rights and obligations towards its shareholders, which are legally defined. Some of the key obligations of the corporation to its shareholders include: Information Obligation: The corporation is obligated to provide its shareholders with information about the company, including annual financial statements, business reports, and information about shareholder meetings. Right for Dividends: Shareholders have the right to a reasonable dividend when declared by the company. Dividend payment is one of the primary ways in which shareholders benefit from their investments. Right to Vote: Shareholders with common shares have the right to vote at shareholder meetings, thereby influencing corporate decisions, including the election of board members and the approval of business decisions.

Multiple voting rights and the restriction of share transfers are strategies that companies can employ to prevent hostile takeovers. Multiple voting rights grant specific shareholders, often the founders or long-serving executives, additional voting power per share, increasing their control over the company. Restricted shares are shares with limitations on their transfer to third parties, enabling the company to exercise control over share trading. Multiple voting rights are a unique feature that only the instrument of crypto stock provides.

A stock company can carry out a capital increase to raise additional capital, and there are two common methods: Ordinary Capital Increase: In an ordinary capital increase, the company raises its capital by issuing new shares and offering them to existing shareholders for purchase. Existing shareholders typically have a preemptive right, allowing them to acquire the new shares in proportion to their existing ownership. If existing shareholders do not fully take up the offer, the unsubscribed shares can be offered to third parties. Conditional Capital Increase: In a conditional capital increase, the capital increase occurs under specific conditions defined in the company's statutes. These conditions may include, for example, the company raising additional capital when it undergoes a merger or converts certain debts into equity. The exact details and procedures for capital increases can vary depending on legal regulations and the company's articles of association. In both cases, the approval of the general meeting is required, and legal and regulatory requirements must be met.

The use of crypto stocks offers significant advantages for employee participation. Firstly, they provide increased liquidity, making it easier for employees to liquidate their holdings as needed, without having to wait for traditional stock placements or company exits. This heightened liquidity offers employees flexibility and access to their assets. Secondly, blockchain technology allows for automation and transparency in the management of employee participation. This speeds up the process and ensures efficient administration, exercise, and tracking of options. These automated processes reduce human errors and improve efficiency.

With the Future Financing Act (ZuFinG), stocks are being digitized. The differences between the new and old systems are as follows: Certificates: Electronic stocks are not issued as certificates in paper form and are not paper-based. Instead, they are registered in an electronic securities register. Issuance Form: Stock corporations have the option to issue their stocks either as traditional certificated stocks or as electronic stocks in accordance with the Electronic Securities Act (eWpG). Technology: Electronic stocks are based on blockchain or Distributed Ledger Technology (DLT). This technology enables secure and cost-effective management of securities transactions. Regulatory Approach: The regulatory approach for electronic stocks is minimally invasive and involves specific changes to the Stock Corporation Act (AktG) and the Electronic Securities Act (eWpG).

The Future Financing Act (ZuFinG) allows for the introduction of crypto stocks based on blockchain technology. The digitization of stocks achieved through this brings several advantages: Emission Platforms and Equity Crowdfunding: Crypto stocks can be placed through specialized platforms or service providers, allowing a wide range of investors to invest in these stocks. Equity crowdfunding could thus be a way to attract new investors. Automated Management and Updating of the Stock Register: The digitization of stocks results in the automated management and updating of both the crypto securities register and the stock register. Furthermore, it provides an opportunity for the crypto stock corporation to engage with its shareholders for marketing purposes. Enhanced Tradeability: Crypto stock corporations can benefit from Distributed Ledger Technology (DLT), which can lead to improved tradeability of their stocks. This can be particularly advantageous for non-listed, smaller and medium-sized enterprises (SMEs), and startups, as it allows them to reach new investor groups. This facilitates, for example, the implementation of employee participation models, which involve a lot of administrative overhead today.

The issuance of bearer shares as crypto stocks would raise a multitude of corporate and anti-money laundering legal issues. Therefore, it was decided in the government draft of the Future Financing Act (ZuFinG) not to permit this. As a result, crypto stocks will always be issued as registered shares.

The crypto stock does not require a central securities depository like Clearstream. Instead, the crypto stock is issued through registration with a crypto securities register. ecrop GmbH, as a fully regulated financial institution, holds a license to operate as a crypto securities register.

The issuance of registered shares as crypto stocks is carried out through registration in a crypto securities register in accordance with § 16 of the Electronic Securities Act (eWpG). A statutory basis expressly allowing for the issuance of crypto stocks is required, which must be stipulated in the company's articles of association. In this case, the certification of crypto stocks is excluded. It is also clarified that transactions involving crypto stocks are only effectively possible through the crypto securities register, and any contractual transfer outside the register is excluded. Therefore, the crypto stock is not a certificate in the traditional sense but an electronic form of shares.

The crypto stock is initially most relevant for companies that do not intend to trade these shares on stock exchanges or Multilateral Trading Facilities (MTFs). In particular, small and medium-sized enterprises (SMEs) and startups can benefit from the improved tradability of crypto stocks associated with Distributed Ledger Technology. These companies could place crypto stocks with a wide range of investors through specialized platforms or service providers, such as Equity Crowdfunding. With the introduction of the DLT pilot regime, a regulatory framework has been developed to enable the use of Distributed Ledger Technology (DLT) in connection with crypto stocks and trading on Multilateral Trading Facilities (MTFs) within the EU. The DLT Pilot Regime aims to support innovation in the crypto stock sector and provide incentives for companies to develop new technologies and business models. ecrop closely monitors these developments and may potentially offer tradability of crypto stocks under the DLT Pilot regime through a product offering in the future.

The requirements for establishing (or converting into) a crypto stock corporation are mostly equivalent to those for establishing a traditional stock corporation. The statutes only need to provide for the issuance of shares as crypto stocks. Furthermore, it is advisable to include a paragraph specifying that the general meeting can be held as a virtual meeting. The ecrop solution encompasses the entire process for both founding and converting into a crypto stock corporation. The legal HotDocs module also allows for the involvement of external legal counsel to ensure compliance with all legal requirements.

The transformation of a traditional stock corporation into a crypto stock corporation is possible. It only requires the creation of the necessary statutory basis that allows for the issuance of shares as crypto stocks and excludes certification (AktG § 10). Additionally, specifying virtual shareholder meetings is advisable. The entire conversion process is covered in the ecrop solution for crypto stocks and provides end-to-end assistance.

The legislator does indeed anticipate the transition towards more modern financial instruments but excludes the possibility of reverting. Consequently, a crypto stock company cannot be converted back into a traditional stock company.

Crypto stocks are issued by registering them in the crypto securities register. The obligations of the stock register represent a subset of the duties of the crypto securities register keeper. This means that the crypto securities register can, in any case, be used simultaneously as a stock register - this is one of the advantages of crypto stocks over traditional stocks. However, there is no obligation to combine both registers. The ecrop solution for crypto stocks includes features for maintaining an existing stock register or using it via API interfaces. Using a stock register without API interfaces is also possible. In this case, changes in both registers must be manually updated, which entails additional administrative work. Therefore, ecrop recommends maintaining the stock register in the crypto register or connecting an existing stock register via API interfaces to automate the corresponding processes.

The crypto securities register plays an essential role in the context of crypto stocks. The registrar acts as the obligatory addressee and responsible legal entity in the management of crypto securities. A crypto stock only comes into existence through its lawful registration in the register. Likewise, ownership transfers are carried out by the registrar and are only legally valid as a result.

ecrop GmbH is a regulated financial institution under German law and is supervised by the Federal Financial Supervisory Authority (BaFin). To provide our innovative financial products, financial services licenses for crypto securities registrar according to § 1 para. 1a sentence 2 No. 8 of the Banking Act (KWG) as well as for the custody of crypto assets and crypto securities according to § 1 (1a) sentence 2 No. 6 KWG are required. ecrop is currently using the transitional provision for the license to act as crypto security registrar until the final license is granted. The license for the custody of crypto assets and crypto securities has been in the permit application process since June 2022. Therefore, we do not currently offer crypto custody services.

ecrop GmbH operates an Information Security Management System certified in accordance with ISO 27001, which is operated by its parent company, YOUKI GmbH. Additionally, the management system complies with the minimum requirements for risk management of banks (MaRisk) and the supervisory requirements for information technology (BaIT) published by the German Federal Financial Supervisory Authority (BaFin).

For any financial institution regulated in Germany, the regulations of the Money Laundering Act (GwG) apply. It mandates the implementation of various measures for money laundering prevention. The key resulting measures that we, at ecrop GmbH, have implemented include: Customer Identification: We verify and document the identity of our customers. Risk Assessment: As part of product design, we conduct a risk assessment to identify potential risks related to money laundering and terrorism financing. This assessment is regularly reviewed and updated as needed. Internal Policies and Training: We have implemented a wide range of internal policies and an extensive training program for employees to ensure understanding and compliance with relevant regulations. Document Retention: Documentation related to customer identification and transactions is retained for a specified period. Reporting Suspicious Activities: In case of suspicion of money laundering or terrorism financing, we are obligated to report it to the relevant authorities. Appointment of an Anti-Money Laundering Officer: ecrop has appointed an Anti-Money Laundering Officer. This person is responsible for overseeing the implementation of anti-money laundering measures in the institution and ensures compliance with legal requirements. These measures contribute to safeguarding the integrity of the financial system and ensuring it is not used for illegal activities. If you have any questions regarding money laundering prevention at ecrop or general compliance inquiries, feel free to contact us at info@ecrop.de.