Germany’s BaFin Warns Public Against ICO Risks

Announcements, Blockchain, ICO News, News, Regulation | November 10, 2017 By:

The Federal Financial Supervisory Authority (BaFin), Germany’s financial regulator, has warned investors of the risks associated with initial coin offerings (ICO). BaFin is the latest regulatory authority to comment on the ramifications of ICOs.

BaFin stated 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. Just like most new trends, the high level of public interest in ICOs is also attracting fraudsters. Therefore, investors should be prepared for the possibility of losing their investment completely.

While not all ICOs are scams, it is somewhat difficult to verify if a certain project is a scam or a fraud. BaFin said the documentation provided by the white papers and terms and conditions is often objectively insufficient, incomprehensible, or even misleading.

“Due to the lack of legal requirements and transparency rules, the consumer is left on their own when it comes to verifying the identity, reputability and credit standing of the token provider and understanding and assessing the investment on offer,” the regulator said. It can also not be guaranteed that personal data will be protected in accordance with German standards.”

The German regulator advised that investors should do some research on the benefits and risks of the project or investment before deciding to participate. Investors should also ensure that the characteristics of the project match both their investment needs and their appetite for risk.