BaFin establishes ICO Operators obligations in Germany

BaFin establishes ICO Operators obligations in Germany, adding that it has received “increased queries” in regards to the legal status of the ICO tokens. What is included in the set of regulations?

22 February, AtoZForex The key financial supervisor of German markets, Germany’s Federal Financial Supervisory Authority (BaFin) has outlined the obligations for Initial Coin Offering (ICO) tokens. The regulator noted that it has received “increased queries” in regards to the legal status of the ICO tokens.

BaFin establishes ICO Operators obligations in Germany

The note dated 20 February from Bafin appears as a follow-up on its earlier warning to investors. In November 2017, German regulator has discussed ICO risks in its cation notice to investors’ community.

The regulator pointed out that the acquisition of tokens may result in substantial risks and losses for investors, which are highly speculative investments. In the statement, BaFin stated:

“Investors should be aware that a total loss of their investment is possible.”

The regulator also added that the rapid growth of ICOs has attracted fraudsters. The risks include volatility in the price of the virtual currencies or tokens offered as part of ICOs, said BaFin.

ICOs are securities?

The update to the warning comes “against a background of increased enquiries to BaFin regarding the areas of securities and asset management,” according to the note. The watchdog also highlighted that the potential ICO operators are enquiring  “whether the underlying tokens, coins or cryptocurrencies behind so-called ICOs are viewed as financial instruments within the area of securities supervision.”

Under Germany’s legislation, ICO operators “are required to check exactly whether a regulated instrument, a financial instrument… or a security, is being dealt with, in order to fulfil potential legal requirements without any gaps.”

BaFin joins its fellow-regulators in Switzerland, where FINMA has also introduced new regulatory framework for ICOs last week. The CEO of FINMA, Mark Branson, believes that these guidelines will help Blockchain technology to enter Swiss markets. Mr. Branson has noted that Blockchain entities “cannot simply circumvent the tried and tested regulatory framework”.

According to the official press release from FINMA, the creation of the rules was pushed forward due to the increasing number of ICOs emerging within Switzerland. Another reason for the guidelines to appear is the lack of transparency and clarity in regards to the regulation of ICOs.

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