BaFin warns against ICO(Initial Coin Offering)s
The Federal Financial Supervisory Authority (BaFin) has now warned against ICO(Initial Coin Offering) s. The warning is sound and justified, but probably comes a little late.
There are some indications that the wave of ICOs is on the run. The projects that want to finance themselves through ICO become either more serious, or less interesting; The ICOs, in general, are being more strictly regulated, and there has not been a new ICO record for a long time. The hype lays, the scene professionalizes itself.
Nevertheless, it makes sense that the Federal Financial Supervisory Authority BaFin has now issued an official warning against ICOs. It strengthens the concerns of those in the cryptocoin circles who have warned for months about the hype of the ICOs. However, the Bafin remains at a warning. Unlike most financial regulators in the world, it does not yet mention any regulation of the ICOs, at least so far.
"The term initial coin offering is based on the concept of the initial public offering (IPO), ie an initial public offering. The conceptual proximity gives the impression that ICOs are comparable to stock issues, which is neither technically nor legally the case, "the Bafin explains in advance. Then she describes the many risks that often accompany ICOs:
The tokens acquired through ICO are subject to high price fluctuations. Often the sale is not yet clear that they are traded on markets at all, and often the trade is then very difficult because the markets are very unliquide.
The business models funded by ICOs are experimental and inadequately described by the white papers
The usual transparency in the financial industry to identify, reliability and creditworthiness of the publisher is not given. Investors are on their own to test this.
The protection of personal data can not be guaranteed according to German standards.
The "systemic vulnerability" of ICOs for money laundering, fraud and possibly also terrorist financing can trigger a total loss, such as when a stock market is closed.
"Before consumers opt for an ICO, they should therefore make sure that they have fully understood the benefits and risks of the project or the investment," concludes the Bafin, advising, "You should ask the issuer as many questions as you need and verify its information from independent sources. In addition, investors should ensure that the characteristics of the project or investment meet their investment needs and risk appetite. "
More information about ICOs promises the Bafin for the next edition of the Bafin journal, which will be published this week.
There are some indications that the wave of ICOs is on the run. The projects that want to finance themselves through ICO become either more serious, or less interesting; The ICOs, in general, are being more strictly regulated, and there has not been a new ICO record for a long time. The hype lays, the scene professionalizes itself.
Nevertheless, it makes sense that the Federal Financial Supervisory Authority BaFin has now issued an official warning against ICOs. It strengthens the concerns of those in the cryptocoin circles who have warned for months about the hype of the ICOs. However, the Bafin remains at a warning. Unlike most financial regulators in the world, it does not yet mention any regulation of the ICOs, at least so far.
"The term initial coin offering is based on the concept of the initial public offering (IPO), ie an initial public offering. The conceptual proximity gives the impression that ICOs are comparable to stock issues, which is neither technically nor legally the case, "the Bafin explains in advance. Then she describes the many risks that often accompany ICOs:
The tokens acquired through ICO are subject to high price fluctuations. Often the sale is not yet clear that they are traded on markets at all, and often the trade is then very difficult because the markets are very unliquide.
The business models funded by ICOs are experimental and inadequately described by the white papers
The usual transparency in the financial industry to identify, reliability and creditworthiness of the publisher is not given. Investors are on their own to test this.
The protection of personal data can not be guaranteed according to German standards.
The "systemic vulnerability" of ICOs for money laundering, fraud and possibly also terrorist financing can trigger a total loss, such as when a stock market is closed.
"Before consumers opt for an ICO, they should therefore make sure that they have fully understood the benefits and risks of the project or the investment," concludes the Bafin, advising, "You should ask the issuer as many questions as you need and verify its information from independent sources. In addition, investors should ensure that the characteristics of the project or investment meet their investment needs and risk appetite. "
More information about ICOs promises the Bafin for the next edition of the Bafin journal, which will be published this week.
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