The German Federal financial Supervisory authority (BaFin) has published a letter to the handling of ICOs, and crypto-currencies in Germany. The objective of this paper is the clarification of the regulatory framework for ICOs in Germany.
As the Swiss ICO Directive, BaFin is also provides an individual assessment for each of the ICO, and the corresponding crypto-currency. In principle, it is necessary to examine, according to the BaFin, whether it’s in Coins that are issued in the framework of ICOs to:
- a financial instrument within the meaning of the securities trading act (Wertpapierhandelsgesetz-WpHG),
- a financial instrument within the meaning of the Directive on markets in financial instruments Directive (MiFID II),
- a security within the meaning of the securities prospectus act (WpPG) or
- a capital investment under the capital investment act (capital investment act)
is. This exam is according to a layman is hardly manageable amount of clauses and laws that are enumerated in the five-page document to the BaFin relatively rigid.
Probably the most important statement of the document, however, is to consider that market participants who want to perform a ICO, responsible for check, whether it is one of the above-mentioned regulated instruments (“are”). Thus, it makes the Bafin, from our point of view very easily by pushing the classification, and thus the responsibility, in principle, to the ICO Initiator.
In case of doubt, if it is not certain whether a Permit requirement, but is intended to be an application to the BaFin Department for Permit requirements and prosecution of unauthorised business (EVG).
Definitions of the BaFin
As a rough guideline for the decision, such as an ICO, and the respective crypto-currency is to be classified, the BaFin after all, even the definitions of some terms.
Accordingly, in the framework of ICOs issued crypto-currencies as the value of paper to be classified, if they are transferable and tradable (specifically on crypto-exchanges), a right to embody (for example, debt claims), and not a payment instrument. A securitization is, according to the BaFin, however, not a mandatory requirement, because the owner of the Coins was documented by means of the Distributed Ledger or Blockchain technology is sufficient.
Crypto currencies as an investment asset to be classified, if the Coin is a share of Something (a common plant).
An investment is always then, if the Coin is not a securities or investment assets, but a stake in the company, a shareholder loan or subordinated loans, participation rights or other facility within the meaning of § 1 Abs. 2 No. 7 The Capital Investment Act.
If, in retrospect, turns out, that the legal requirements have not been met, this can lead to the prohibition of the continuation of the ICOs and the transactions by the BaFin. Violations of the rules can be evaluated in adversity as order (punishable by fines) to criminal offences.
All in all, it remains, in our view, this is a very opaque legal framework that encourage the ICO to Germany as a location, but rather will hinder.
For smaller projects it will initially be difficult, the legal assessment. Clear and transparent guidelines, as in Switzerland, the foster ICOs, it would have been from our point of view, desirable.
The note of the BaFin letter:
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