Glossary: terms around tokenised securities

Short definitions of key terms. Each term has its own anchor and links to the detailed article where available.

AIF (alternative investment fund): An AIF is any investment fund that is not a UCITS (§ 1(3) KAGB). An investment fund is a collective investment undertaking that raises capital from a number of investors in order to invest it for their benefit in accordance with a defined investment policy (§ 1(1) KAGB). AIFs are managed by an alternative investment fund manager, in Germany by an AIF management company (KVG). More: Tokenising a special AIF: crypto fund units or an InvAG?
Bearer bond: A bearer bond is an instrument in which the issuer promises a performance to the holder (§ 793(1) BGB). Bonds are usually bearer bonds and can also be issued electronically under § 1 no. 1 eWpG. More: Issuing a Digital Bond: The Process in 7 Steps
Bonus-interest bond: A bonus-interest bond is a bond with a fixed base interest rate and an additional, performance-related bonus interest; the conditions and amount of the bonus are set out in the terms and conditions (§ 2(1) SchVG). As a bearer bond (§ 793 BGB) it is a security and can be issued electronically under the eWpG. If a stock corporation issues it and the bonus is linked to shareholders' profit shares, it may be a profit-sharing bond (Gewinnschuldverschreibung), which may only be issued on the basis of a resolution of the general meeting (§ 221(1) AktG). More: Issuing a Digital Bond: The Process in 7 Steps
More at heartstocks: Security types at heartstocks
Central register: A central register serves the central entry and publicity of central register securities (§ 12(1) eWpG). It is kept by a central securities depository or by a custodian expressly authorised by the issuer in text form (§ 12(2) eWpG). More: What is the eWpG? Electronic securities explained
Crypto custody (qualified crypto custody business): The qualified crypto custody business includes, among other things, safeguarding private cryptographic keys for others that are used to hold or dispose of crypto securities, crypto fund units or other DLT-based securities (§ 1(1a) sentence 2 no. 6 KWG). It requires a licence under § 32(1) with § 1(1a) sentence 2 no. 6 KWG; investment firms need a licence under § 15 WpIG (§ 2(4) no. 3 WpIG). More: Crypto securities register: who may keep it and what applies?
Crypto fund unit: Crypto fund units are electronic unit certificates of a Sondervermögen entered in a crypto securities register (§ 1 KryptoFAV). They can be issued for the entire Sondervermögen or for individual unit classes; the legal basis is § 95 KAGB. More: Tokenising a special AIF: crypto fund units or an InvAG?
Crypto securities register: A crypto securities register must be kept on a tamper-proof recording system in which data is logged in chronological order and protected against unauthorised deletion and subsequent alteration (§ 16(1) eWpG). Keeping it generally requires a licence (§ 32(1) with § 1(1a) sentence 2 no. 8 KWG), with exceptions set out in, among others, § 32(1f) KWG; investment firms need a licence under § 15 WpIG (§ 2(4) no. 4 WpIG). More: Crypto securities register: who may keep it and what applies?
Crypto security: A crypto security is an electronic security entered in a crypto securities register (§ 4(3) eWpG). Crypto securities are usually transferable securities and thus financial instruments; in that case MiCAR does not apply (Article 2(4)(a) MiCAR). More: Crypto securities register: who may keep it and what applies?
Crypto share: A crypto share is an electronic share entered in a crypto securities register. Under § 1 eWpG, registered shares can be issued electronically in both types of register, whereas bearer shares can only be issued in a central register. The register keeper may also be mandated to keep the share register (§ 30a eWpG). More: Electronic shares and crypto shares: what applies since 2023?
Denomination: The denomination is the nominal amount of a single security in an issue. It has regulatory consequences: offers with a minimum denomination of EUR 100,000 are exempt from the prospectus requirement (Article 1(4)(c) Prospectus Regulation). More: Prospectus Duty and WIB 2026: The EUR 12m Threshold
Depositary: The depositary holds the assets of an investment fund in custody and oversees the management company. For AIFs, licensed credit institutions and certain investment firms in particular are eligible, and for certain closed-ended AIFs also trustees (§ 80 KAGB). For crypto fund units, it is in principle also the register keeper (§ 3 KryptoFAV). More: Tokenising a special AIF: crypto fund units or an InvAG?
DLT (distributed ledger technology): Under Article 3(1)(1) MiCAR, DLT is a technology that enables the operation and use of distributed ledgers. A distributed ledger is an information repository holding records of transactions that is shared and synchronised across a set of network nodes using a consensus mechanism (Article 3(1)(2) MiCAR). More: MiCAR or eWpG: which regime applies to your token?
Electronic security: An electronic security is issued by the issuer arranging an entry in an electronic securities register instead of issuing a certificate (§ 2(1) eWpG). It has the same legal effect as a certificated security and is deemed a thing within the meaning of § 90 BGB (§ 2(2) and (3) eWpG). More: What is the eWpG? Electronic securities explained
eWpG (Electronic Securities Act): Since 10 June 2021, the German Electronic Securities Act (eWpG) has allowed securities to be issued without a paper certificate by entry in an electronic securities register. It applies to bearer bonds, registered shares and, if entered in a central register, bearer shares (§ 1 eWpG). More: What is the eWpG? Electronic securities explained
Financial instrument: Under § 2(4) of the Securities Trading Act (WpHG), financial instruments include securities, units in investment funds, money market instruments, derivatives and investment products (Vermögensanlagen). Securities are all transferable securities that are negotiable on financial markets, even if no certificates have been issued for them (§ 2(1) WpHG). For MiCAR, however, the MiFID II definition applies (Article 3(1)(49) MiCAR with Article 4(1)(15) of Directive 2014/65/EU); investment products (Vermögensanlagen) are not covered by it. More: MiCAR or eWpG: which regime applies to your token?
Investment product (Vermögensanlage): Investment products (Vermögensanlagen) are investments not represented by securities and not structured as investment fund units, such as company participations, trust assets, profit-participating loans, subordinated loans, profit participation rights and registered bonds (§ 1(2) VermAnlG). Their public offering generally requires a sales prospectus and an investment product information sheet (§§ 6, 13 VermAnlG). More: Tokenised Securities vs. Crowdinvesting and Subordinated Loans
Investment stock corporation (InvAG): An InvAG is an investment fund in the legal form of a stock corporation; together with the investment limited partnership (InvKG) it forms the category of investment companies (§ 1(11) KAGB). The KAGB distinguishes between the InvAG with variable capital (§§ 108 et seq. KAGB) and with fixed capital (§§ 140 et seq. KAGB); the Stock Corporation Act applies additionally unless the KAGB provides otherwise (§ 108(2), § 140 KAGB). Unlike a Sondervermögen, an InvAG can also be managed by a registered AIF management company (§ 44(1) sentence 1 no. 7 KAGB). More: Tokenising a special AIF: crypto fund units or an InvAG?
Issue (issuance): An issue is the creation of new securities by an issuer to raise capital. For electronic securities, issuance takes place by entry in an electronic securities register (§ 2(1) eWpG). More: Issuing a Digital Bond: The Process in 7 Steps
Issuer: Under Article 2(h) Prospectus Regulation, an issuer is a legal entity that issues or proposes to issue securities. For bonds, the issuer is the obligor of interest and repayment. More: Issuing a Digital Bond: The Process in 7 Steps
KAGB (German Investment Code): The KAGB governs investment funds, their management companies and depositaries in Germany. Among other things, it implements the UCITS Directive and the AIFM Directive and was last amended in 2026 by the Fund Risk Limitation Act (Fondsrisikobegrenzungsgesetz) (as of October 2026). More: Tokenising a special AIF: crypto fund units or an InvAG?
More at heartstocks: FAQ: heartstocks and KAGB structures
KryptoFAV (Crypto Fund Units Ordinance): The KryptoFAV of 3 June 2022 has applied since 18 June 2022 and is based on § 95(5) KAGB. It extends the eWpG rules on crypto securities registers to units of a Sondervermögen and designates the depositary, or a licensed firm mandated by it, as register keeper; it was last amended by the Fund Risk Limitation Act with effect from 16 April 2026. More: Tokenising a special AIF: crypto fund units or an InvAG?
KVG (management company): A KVG is a company with its registered office and head office in Germany whose business is the management of investment funds (§ 17(1) KAGB). It generally needs a BaFin licence (§ 20(1) KAGB); for AIF management companies that manage only special AIFs below the thresholds in § 2(4) KAGB, registration is sufficient instead (§ 44 KAGB); they may then not manage a Sondervermögen (§ 44(1) sentence 1 no. 7 KAGB). More: Tokenising a special AIF: crypto fund units or an InvAG?
More at heartstocks: FAQ: heartstocks KVG partnership
KYC (know your customer): KYC refers to customer due diligence under the Anti-Money Laundering Act (GwG). The general due diligence duties include identifying the contracting party, clarifying the beneficial owner, PEP screening and ongoing monitoring of the business relationship (§ 10(1) GwG). More: White-label investment platform: what asset managers need
More at heartstocks: Investor onboarding
Liability umbrella: In practice, the liability umbrella (Haftungsdach) is the institution (investment firm or CRR credit institution, § 2(10) KWG) under whose liability a tied agent operates. The agent's activity is attributed to this institution (§ 3(2) sentence 2 WpIG); an investment firm must select and supervise the agent and document this (§ 28 WpIG). More: Tied agent under § 3(2) WpIG explained
Listing Act: The Listing Act is the EU legislative package to simplify access to capital markets, which includes Regulation (EU) 2024/2809. Among other things, it amended the Prospectus Regulation and introduced the prospectus exemption for offers below EUR 12 million, which has applied since 5 June 2026. More: Prospectus Duty and WIB 2026: The EUR 12m Threshold
MiCAR: MiCAR is Regulation (EU) 2023/1114 on markets in crypto-assets. Under Article 2(4)(a), it does not apply to crypto-assets that qualify as financial instruments. Crypto securities under the eWpG are usually transferable securities and thus financial instruments; in that case securities law applies, not MiCAR. More: MiCAR or eWpG: which regime applies to your token?
Preference share: A preference share carries a preference in profit distribution, such as a preferential or increased dividend; voting rights may be excluded in return (§ 139(1) AktG). Non-voting preference shares may only be issued up to half of the share capital (§ 139(2) AktG). More: Electronic shares and crypto shares: what applies since 2023?
Profit participation certificate: A profit participation certificate (Genussschein) is a security representing profit participation rights, typically a share in profits without voting rights. It has no statutory definition; stock corporations may only grant such rights on the basis of a shareholders' resolution (§ 221(3) AktG). Profit participation rights not in securities form are investment products (§ 1(2) no. 5 VermAnlG). More: Tokenised Genussschein: Security or Investment Product?
Prospectus Regulation: Regulation (EU) 2017/1129 governs when a prospectus is required for public offers and admissions to trading of securities. Since 5 June 2026, public offers below EUR 12 million per issuer or offeror over twelve months are exempt (Article 3(2)); Member States may opt for EUR 5 million instead (Article 3(2a)). More: Prospectus Duty and WIB 2026: The EUR 12m Threshold
Qualified investor: Under Article 2(e) Prospectus Regulation, qualified investors are essentially professional clients under Annex II MiFID II, clients treated as professional on request and eligible counterparties. Offers addressed solely to qualified investors are exempt from the prospectus requirement (Article 1(4)(a) Prospectus Regulation). More: Prospectus Duty and WIB 2026: The EUR 12m Threshold
Referrer (Tippgeber): Referrer (Tippgeber) is not a statutory term. It describes a person who merely points to an offer, a provider or a contact without deliberately influencing the investor's willingness to conclude a transaction. According to BaFin's guidance notice on investment brokerage, such a mere pointer is not investment brokerage (§ 2(2) no. 3 WpIG, § 1(1a) sentence 2 no. 1 KWG); anyone who deliberately works towards the conclusion of a transaction, by contrast, needs a licence or tied agent status. More: Tied agent under § 3(2) WpIG explained
More at heartstocks: Referrer model at heartstocks
Register keeper: The register keeper of a crypto securities register is the party named as such by the issuer to the holder; without such a designation, the issuer itself is deemed the register keeper (§ 16(2) eWpG). For crypto fund units, it is the depositary or a firm mandated by it (§ 3 KryptoFAV). More: Crypto securities register: who may keep it and what applies?
Registered KVG: A registered KVG is an AIF management company that, instead of a licence under § 20 KAGB, only needs to register with BaFin (§ 44 KAGB). Under § 2(4) KAGB this requires, among other things, that it manages only special AIFs and that its assets under management do not exceed EUR 100 million including leverage or EUR 500 million without leverage and without redemption rights within five years. It may only manage AIFs in corporate or partnership form, not a Sondervermögen (§ 44(1) sentence 1 no. 7 KAGB). For KAGB structures, heartstocks works with a connected registered KVG as a partner. More: Tokenising a special AIF: crypto fund units or an InvAG?
More at heartstocks: FAQ: heartstocks KVG partnership
Registered share: Registered shares are issued in the shareholder's name and must be entered in the company's share register regardless of certification (§ 67(1) AktG). In relation to the company, only the registered person counts as shareholder (§ 67(2) AktG). Under § 10(1) AktG, shares are generally registered shares. More: Electronic shares and crypto shares: what applies since 2023?
Secondary market: The secondary market is trading in securities already issued, between investors, as opposed to the initial issue on the primary market. For many unlisted digital securities the secondary market is limited, so investors must expect restricted tradability. More: Tokenised Securities vs. Crowdinvesting and Subordinated Loans
Securities information sheet (WIB): The WIB is a short information document under § 4 WpPG for prospectus-free public offers under Article 3(2) Prospectus Regulation. It is limited to three A4 pages, or up to four for electronic securities (§ 4(3) and (3a) WpPG), and may only be published once BaFin permits it; BaFin decides within ten working days (§ 4(2) WpPG). More: Prospectus Duty and WIB 2026: The EUR 12m Threshold
Securities prospectus: A securities prospectus is the information document approved by the competent authority under the Prospectus Regulation. In the EU, securities may generally only be offered to the public after a prospectus has been published, unless an exemption applies (Article 3(1) Prospectus Regulation). More: Prospectus Duty and WIB 2026: The EUR 12m Threshold
Smart contract: Under Article 2(39) of Regulation (EU) 2023/2854 (Data Act), a smart contract is a computer program used for the automated execution of an agreement or part of it, using a sequence of electronic data records whose integrity and chronological order are ensured. For crypto securities, smart contracts can control, for example, transfers and register entries. More: Crypto securities register: who may keep it and what applies?
Special AIF: A special AIF is an AIF whose units may only be acquired by professional and semi-professional investors (§ 1(6) KAGB). Semi-professional investors include anyone who commits to invest at least EUR 200,000 and meets the further conditions of § 1(19) no. 33 KAGB. More: Tokenising a special AIF: crypto fund units or an InvAG?
SPV (special purpose vehicle): An SPV is a company set up for a specific purpose, for example to hold a single project and issue securities for it. Creditors have claims against the SPV, so project risks are separated from other business areas, but the assets available to creditors are limited to the SPV. More: Financing renewables: digital bonds and citizen participation
Subordinated loan: A subordinated loan is a loan whose repayment ranks behind other creditors in insolvency. Subordinated loans are investment products (§ 1(2) no. 4 VermAnlG). For a public offer, a minimum term of 24 months and a notice period of at least six months generally apply (§ 5a VermAnlG); this requirement does not apply under the crowdfunding exemption in § 2a VermAnlG. More: Tokenised Securities vs. Crowdinvesting and Subordinated Loans
Subscription: A subscription is an investor's binding declaration to acquire securities for a specified amount. For digital securities, the subscription is followed by payment and the entry of the investor in the electronic securities register. More: Issuing a Digital Bond: The Process in 7 Steps
Subscription documents: Subscription documents are the documents on which investors base their subscription: in particular the terms and conditions or terms of issue, the prospectus or securities information sheet, the subscription form and risk warnings. Which documents are required depends on the type of security, volume and target group. More: Issuing a Digital Bond: The Process in 7 Steps
More at heartstocks: Project workflow with subscription documents
Terms and conditions of a bond: The terms and conditions describe the performance owed and the rights and obligations of the debtor and the creditors (§ 2(1) Bond Act, SchVG). For electronic bonds they must be accessible at the register keeper (§ 2(2) SchVG); the eWpG calls them terms of issue (§ 4(7), § 5 eWpG). More: Issuing a Digital Bond: The Process in 7 Steps
Tied agent: A tied agent only provides investment brokerage, investment advice or placement, exclusively on behalf of and under the liability of an institution: an investment firm (§ 3(2) WpIG) or a CRR credit institution (§ 2(10) KWG). It needs no licence of its own if the liable institution has notified BaFin in advance; BaFin keeps a public register. Example: heartstocks GmbH is a tied agent of CONCEDUS GmbH, Nuremberg, and is entered in the BaFin register under number 80176062. More: Tied agent under § 3(2) WpIG explained
More at heartstocks: Imprint with tied agent details
Token: A token is a digital entry on a blockchain or another distributed ledger that represents a value or a right. What matters legally is not the technology but the right represented: a token can be a security, a crypto-asset within the meaning of MiCAR or something else. More: MiCAR or eWpG: which regime applies to your token?
Tokenisation: Tokenisation means representing an asset or right digitally as a token on a distributed ledger. For tokenised securities under German law, this is usually done by entry in a crypto securities register under the eWpG. More: What is the eWpG? Electronic securities explained
Transaction fee: A transaction fee is a charge incurred for a single transaction, such as a subscription. Investment services firms must inform clients in good time and in a comprehensible form about all costs and associated charges (§ 63(7) WpHG). Example: with heartstocks, investors bear a one-off transaction fee of 1% per subscription, which does not burden the issuer. More: What Does Tokenisation Cost? Cost Blocks at a Glance
More at heartstocks: Fees at heartstocks
Video identification: Video identification is a procedure for identifying customers via video transmission. BaFin has set out the requirements in Circular 3/2017 (GW), including trained staff, an uninterrupted real-time connection with end-to-end encryption and identity documents with verifiable security features. More: White-label investment platform: what asset managers need
White-label: White-label refers to a technical solution provided by a service provider and used by a client under its own brand. For investment platforms, regulatory roles such as brokerage, register management and custody remain with the respective licensed parties. Example: the heartstocks white-label solution consists of eight combinable building blocks; onboarding, customising and go-live take 6 to 10 weeks. More: White-label investment platform: what asset managers need
More at heartstocks: White-label at heartstocks