The planned amendment to the Austrian Deposit Act (Depotgesetz) represents a (first) step towards digitization and the removal of bureaucracy in the financial services sector.

The government bill submitted to the finance subcommittee of the Austrian National Council for discussion a few days ago on a federal law amending the Austrian Deposit Act (Depotgesetz) aims to create a “digital global certificate” for bonds and investment certificates as an alternative to the physical global certificates that have been required so far.

Due to the possibility of collective custody of securities in one or more global certificates including the deposit of these global certificates at an authorized securities clearing and deposit bank (in Austria OeKB CSD GmbH), a non-physical securities transaction can already be realized on the basis of the existing legislation. The acquisition of securities held in custody at the central securities depository in the form of global certificates is effected via securities giro-transactions, by rebookings made by the depository banks of the transferor and the transferee respectively and the central securities depository executes the transfers to the global certificate with respect to the accounts held by the depository banks at the central securities depository on the basis of a corresponding holding instruction.

However, the process of the first-time integration of the central securities depository into the issuance process is, on the basis of the current legislation, still necessarily connected with the creation of a physical (global) certificate, the transfer of such certificate to the central securities depository and the deposit of the global certificate at the central securities depository. These aspects are now to be countered by an alternative through the amendment of the Austrian Deposit Act, also with a view to making Austria more attractive for international market participants.

On the one hand, the draft amendment to the Austrian Deposit Act contains a legal definition of “digital global certificates”. The “digital global certificate” is created by the creation of an electronic data record at a central securities depository on the basis of the information electronically communicated to this central securities depository by the issuer regarding the rights to the extent of the credits on the securities accounts held at the central securities depository. This information shall be transmitted by the issuer to the central securities depository in the structured form specified by the central securities depository and shall be stored and managed by the central securities depository in the corresponding structured form.

With shares in a “digital global certificate” the same rights and functions under securities law shall be associated as with shares in a (physical) global certificate. According to the explanatory notes to the draft government bill these rights are “digitally securitized” but are at the same time equivalent to the traditionally securitized rights in physical global certificates, particularly in terms of custody and property law, and are therefore identical to physical global certificates in terms of legal nature and legal effects. Existing physical global certificates could also be converted into digital global certificates in the future.

However, unlike in Germany with the German draft government bill for a law on the introduction of electronic securities (Gesetz zur Einführung von elektronischen Wertpapieren - eWpG) published on 16 December 2020, the Austrian legislator has not yet taken up the overdue area of regulation on other electronic securities and in particular crypto securities. The German draft bill distinguishes between the maintenance of a central electronic securities register by a central securities depository and the maintenance of registers, among them those run by distributed-ledger-technologies, for the issuance of electronic securities, at the same time mandating the supervision over such registers by the German Federal Financial Supervisory Authority (Bundesanstalt für Finanzdienstleistungsaufsicht).

Certainly, the creation of a “digital global certificate”, as an additional option alongside the existing physical global certificate, simplifies the securities issuance process, but is only a first - and compared to the German draft bill on the eWpG – limited step towards digitization.