Till date, Germany has is keeping a distance from the cryptocurrency. However, digital currencies are no longer actively operating. Germany’s main financial and securities regulator have issued a warning for investors on ICOs. The Federal Financial Supervisory Authority (BaFin), warning investors of “substantial risks” involved in ICOs and token sales.
The financial authority wrote:
“ICOs are a highly speculative form of investment. Investors should, therefore, be ready 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”.
At a glance, ICO funding is the new form of fundraising where startups and companies raise capital in crypto exchanges for blockchain tokens. Since ICOs tokens are likely to significant price instability with a risk of inattentive secondary markets. BaFin mentions that investors much be aware of several risks in token sales like losing their investments.
BaFin’s statement reads,
“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 ensure that personal data will protect in accordance with German standards”.
Furthermore, before any involvement in the ICOs projects, consumers must understand the risks and benefits. Therefore, regulator underlines the complete susceptibility of ICOs to money laundering, fraud, and terrorist financing.
“Before any consumer decides to participate in an ICO, they should make certain that they have fully understood the benefits and risks of the project or investment”.
Though, notice stopped issuing guidelines for ICO operators. However, the more comprehensive guide for investors will be released on Nov 15th.
Additionally, BaFin indicates that it might take action against ICO organizers. Similarly, had happened earlier in the US when firm suggested that “authorities taking necessary measures”. However, that results in a loss for investors in token sales.