German Financial Regulator BaFin Clarifies Stance On ICOs

ICO News, Regulation | February 21, 2018 By:

The Federal Financial Supervisory Authority (BaFin), Germany’s financial regulator, has issued a “letter of advice” on the regulatory classification of tokens issued via initial coin offerings (ICO).

The regulator stated that it has been receiving many inquiries about its stand on ICOs and whether tokens distributed during crowdsales are considered financial instruments.

BaFin clarified the regulatory classification of the tokens in the area of security supervision. The regulator said that they examine tokens in individual cases to determine whether it is a financial instrument, a security, or assets under the German Investment Fund Act (VermAnlG). This applies to to any company or individual dealing in tokens.

To ensure full compliance with legal requirements, BaFin said market participants are required to check closely the existence of a regulated instrument, such as a financial instrument or a security. In case of any discrepancies, issuers should approach the relevant department at BaFin.

The letter follows a warning on ICOs from BaFin in November 2017. At the time, the regulator said that ICOs are a highly speculative form of investment and that the acquisition of tokens as part of ICOs may result in substantial risks for investors. It also advised investors to do some research on the benefits and risks of the project or investment before deciding to participate.

Last week, the Swiss Financial Market Supervisory Authority (FINMA) issued guidelines on how it intends to apply financial market legislation in handling inquiries from ICO issuers.