Germany's Top Financial Regulator Breaks The Silence On ICOs
Germany's financial regulatory authority, BaFin, has issued a statement warning consumers on the risks of ICOs.
Germany's top financial regulator has stepped in to warn the public about investing in obscure ICOs and digital currency offerings. BaFin joins a long list of regulators who have issued formal statements on the craze for cryptocurrency crowdfunding. The announcement came via the regulator's website earlier today.
Until today, Germany's Federal Financial Supervisory Authority has long kept mum on the controversial fundraising mechanism that has netted close to $ 3 billion for hundreds of blockchain startups. In its latest release, BaFin stated ICOs are a ‘highly speculative investment' that carry ‘substantial risk.'
A particular note to consumers read:
"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. It can also not be guaranteed that personal data will be protected in accordance with German standards."
The agency's statement stopped short of issuing guidelines or placing any requirements on organizers of ICOs in Germany. But it did promise a more comprehensive investor guide in a forthcoming BaFin Journal slated for November 15.
Germany is not particularly a favorite destination for ICOs, boasting roughly six startups that have announced ICOs towards the end of this year. The first ICO to market was ‘Wys Tokens' by Berlin entrepreneur Tobias Haag that lets customers shop on Wysker app.
Regulatory concerns typically stem from the lack of transparency surrounding the offerings which lure consumers with no clarity on what investors should expect in return. In some cases like Swiss-based Tezos, all the $232 million raised for the project was declared as ‘donations.'
"Unfortunately it's true that many ICOs take place with fraudulent intent. They just want to exploit the hype to extract money from unknowing customers," said Friederike Ernst, secretary general of Germany's newly-founded industry lobby, the Blockchain Federal Association on speaking to the Handelsblatt.