German financial regulators appear to be following the Swiss lead in considering ICOs on a case-by-case basis rather than regulating with a broad brush.
The German financial regulator, Bundesanstalt für Finanzdienstleistungsaufsicht (BaFin), has issued an update on the situation surrounding ICOs after “increased enquiries” from companies wishing to offer tokens in Germany.
The big question, as ever, for ICO operators and regulators, is “ … whether the underlying tokens, coins or cryptocurrencies … are viewed as financial instruments within the area of securities supervision.”
Existing Legislation Deemed Adequate
Last week Switzerland offered some clarity on how regulators there would deal with ICOs, introducing four categories of ICO, with regulation depending on what kind of token is being offered. Crucially it made a distinction between utility and security tokens, with the former exempt from securities legislation.
BaFin’s statement suggests that all ICOs should be covered by existing European legislation around securities and financial assets and German laws relating to banking, capital investment and insurance. ICO operators are obliged to check whether their offering “ … is being dealt with, in order to fulfil potential legal requirements without any gaps.”
However, like their Swiss counterparts, German regulators have recognised that there are different types of ICO, and different types of token. Some may confer voting rights, while others are more akin to financial instruments. For an ICO token to be considered a security it “ … should be transferable and tradable on cryptocurrency trading platforms”.
Also in common with the Swiss, BaFin is wary of offering general advice, preferring to examine each ICO on its individual merits. Tokens will be subject to a “precise case-by-case examination”.
Their last word is that if a company plans on conducting a token sale in Germany, but is unclear about the requirements, it should contact BaFin for guidance.