The president of Germany’s financial watchdog supports the creation of a global regulatory framework for initial coin offerings (ICOs). BaFin president Felix Hufeld, who is a staunch critic of crypto financial rounds, tells private investors to “keep their hands off such things.”
An independent entity under the country’s Federal Ministry of Finance, the Federal Financial Supervisory Authority (BaFin) is Germany’s financial regulatory authority, expected to oversee ICOs once regulation is put in place.
Whether ICOs will become a regular part of the financial system is still uncertain. However, in an interview with Handelsblatt, Hufeld states that regulators are already discussing methods how to suitably create financial regulation. The BaFin president explains:
“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.”
While the number and volume per ICO continue to see a significant increase, the agency has released warnings directed to investors. Hufeld further states:
“Therefore, I can only advise private investors to keep their hands off such things.”
BaFin is slated to oversee cryptocurrency fundraisers, which fall under current securities law. In addition, these crypto fundraisers are not entirely unregulated. Hufeld is also not in favor of regulating faster than the market can develop. He adds:
“There is rarely anything good about it.”
Recently, the Berlin Court of Appeals has decided against BaFin’s stance that Bitcoin and other cryptocurrencies are units of account and therefore should be classified as financial instruments. This puts Bitcoin and other digital currencies under the regulator’s control. Hufeld further states that the court’s ruling adds more strain to legislators to develop regulation for digital currencies and fundraisers. He goes on to say:
“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.”
The financial regulator is not obligated to adhere to the ruling and will most likely not change its stance until a new law is introduced or an administrative court upholds the Berlin court’s decision.
Meanwhile, Reed Smith LLP, an international law firm, tells cryptocurrency companies to assume a cautious attitude as well as obtain legal advice and BaFin’s approval. Without the approval, market players are at risk of being shut down, fined, or even face up to five years in prison.