Germany’s top financial regulatory agency, BaFin—the Bundesanstalt für Finanzdienstleistungsaufsicht, or the Federal Financial Supervisory Authority in English—just issued a statement warning about the risks inherent to investing in Initial Coin Offerings (ICOs).
In a due diligence memorandum, BaFin went on the record for German investors, officially stating that excitement in ICOs must be tempered with the speculative reality of digital assets:
“ICOs are a highly speculative form of investment. Investors should therefore be prepared for the possibility of losing their investment completely. As is the case with most new trends, the high level of public interest in ICOs is also attracting fraudsters.”
BaFin is also majorly concerned with the extreme volatility and lack of guarantee for tokens post-ICO, noting:
“Tokens acquired in an ICO often experience significant price fluctuations. There is a risk of there being no liquid secondary market or no secondary market at all where the investor can sell the tokens acquired in order to liquidate the investment at a profit.”
The points are fair ones, and the body’s comments mark some of the first official comments from the German government on Bitcoin and cryptocurrencies in general.
— AllThingsAltBitcoins (@alt_bit_coins) November 10, 2017
The tone is bearish for now, but BaFin’s comments clearly fall short of indicating an impending ICO crackdown for German crypto investors.
If anything, there was a certain leniency to the agency’s comments—the crux of the warning being that German investors are free to speculate on high-risk ICOs but will do so with no governmental protections:
“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.”
Perhaps continued authoritative regulatory declarations like these can help to tamper down on the “irrationality” that Ethereum co-founder Joseph Lubin has identified in the ongoing ICO craze.
TLDR: Germany’s top regulatory body just warned German investors over ICOs, saying investors could potentially lose everything in the ongoing ICO craze if they aren’t cautious.