German BaFin Regulator Issues ICO Investor Warning, Supports International Crypto Standards
In what appears to be an outright biased move on behalf of the German government, the president of BaFin, Felix Hufeld, has told investors to lay their hands of “ICOs” since they are prone to a lot of financial scandals. However, he did add that he was in favor of creating a “global regulatory framework” for initial coin offerings so that they can become safer for everyone to make use of in the near future.
BaFin is an independent institution whose governance is looked after by Germany’s Federal Ministry of Finance. If the agency’s wishes were to come true, ICOs and other similar offerings will start to fall under the supervision of the government— thereby subjecting crypto products to the same international standards as other conventional fiat offerings.
With that being said, it still remains to be determined whether it will actually be possible to subject ICOs to the same regulations as fiat currencies, since both of the products seem to offer completely different advantages. In this regard, Hufeld told an established German media outlet that:
“We do not want to stifle innovation, but must avert dangers at the same time. For example, it is important for us to take action against money laundering and safeguard privacy rights of investors. In addition, there should be certain minimum standards for the underlying terms of the contract. Therefore, I can only advise private investors to keep their hands off such things”.
More on the Matter
As things stand, cryptocurrency fundraisers are subject to existing securities laws that are looked over by BaFin. Also worth mentioning is that recently, the Berlin Court of Appeals recently ruled that “Bitcoin is a financial instrument, and thus falls under the purview of BaFin”.
In this regard, Hufeld mentioned that the court’s decision has now added further pressure on policymakers to establish guidelines for ICOs and cryptocurrencies ASAP.
“Such considerations are necessary for the sole reason that it is necessary to make financial regulation future-proof, also with a view to new technological phenomena such as crypto-tokens. As I have said, international standards seem worthwhile for me, so discussions take place in a variety of international forums.”
After taking into account all that has been happening in Germany, international law firm Reed Smith LLP has advised all budding crypto startups to seek legal authorisation of BaFin before initiating any large monetary ventures— since a failure to comply might lead business owners to pay up a hefty fine or send them to jail for a period of 5 years.