German Regulator Takes Closer Look At ICOs As Practice Popularizes

German Regulator Takes Closer Look At ICOs As Practice Popularizes

by May 18, 2018

The growing popularity of cryptocurrencies and initial coin offerings (ICOs) has led governments around the world to take a closer look into the thriving industry.

Germany’s Federal Financial Supervisory Authority, better known as BaFin, has joined global financial regulators in monitoring the space and releasing guidance for German token issuers and investors.


ICO regulation in Germany

BaFin has adopted a case-by-case methodology for monitoring ICOs conducted in Germany. The financial regulator is currently screening the domestic market, looking for ICOs and reviewing their business cases for abuse prevention reasons. Special units of BaFin are in charge of looking into whitepapers and terms and conditions of each ICO, determining whether a token issuer needs to obtain authorization pursuant to the German Banking Act, Investment Code, Payment Services Supervision Act, or Insurance Supervision Act, and whether prospectus requirements apply.

BaFin released its position on ICOs earlier this year, detailing the treatment of token sales from a securities law perspective. The note did not create a regulatory regime specific to ICOs but rather reiterated that these would be subject to financial regulations depending on their characteristics.

The regulator stated that tokens may in particular be securities, asset investments, units in investment funds, underlyings of derivatives contracts, or units of account. Depending on the classification as one of the aforementioned instruments, the offering and trading of crypto tokens, including cryptocurrencies as well as other services relating to crypto tokens, are potentially subject to prospectus requirements, licensing requirements, as well as trading regulations.


ICO activity in Germany

cryptocurrency pixabay

Cryptocurrency, Pixabay

ICOs have been all the rage these past years raising over US$4 billion globally. While countries such as the US, the UK, Switzerland and Singapore have emerged as global ICO hubs, Germany is lagging behind in terms of ICO activity and volume. Nevertheless, Germany did host several noteworthy token sales.

For instance, the Germany-based IOTA Foundation ran an ICO in 2015 through which it raised a little over US$400,000. The organization oversees the development of the IOTA project, which is developing a transactional Internet-of-Things (IoT) settlement layer by combining elements of blockchain technology with the IoT. The organization is currently working with some big names including Bosch, Volkswagen, Orange and Fujitsu.

Savedroid, a Frankfurt-based startup developing an artificial intelligence-fueled ecosystem of crypto saving and investing products for the masses, raised US$50 million earlier this year through a combination of ICO and private funding.

Most recently, German startup Shivom claims to have raised a total of US$25 million in its pre-sale and public sale. Shivom’s main offering is genome sequencing, which it will offer users for around $900, with data from the sequencing then being stored on the blockchain to create “the largest genomic data-hub on the planet.”

Berlin-based Herdius is looking to raise up to 30 million EUR in its ICO in June. The startup is building a platform that is meant to be highly scalable and capable of fast transactions across different blockchains in a truly decentralized way.

Other upcoming ICOs from Germany include Bitwala, a global payment services provider, Brickblock, a protech startup, and Etherisc, a decentralized insurance platform.

Alongside these Germany-based companies, several others German born startups have opted to have their headquarters based in another country while operating from Germany.

An example is Opiria, which is headquartered in the Cayman Islands. Opiria is developing a global decentralized marketplace for the secure and transparent buying and selling of personal data. Based on the Ethereum network, the platform enables consumers to use their personal data to create a passive income stream.

Similarly, the Lisk Foundation is based in Zug, Switzerland, but the team is located in Germany. The organization oversees the Lisk blockchain network, a platform that aims to make it easy for developers to build and deploy blockchain applications in JavaScript. Lisk raised US$7.2 million in its ICO in 2016.


Featured image: German flag, Pixabay.