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German Financial Markets Regulator to Begin Strict Oversight of ICOs

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The Federal Financial Supervisory Authority (BaFin) has released fresh guidelines on the classification of tokens offered during ICOs. Included in the guidelines are those tokens considered to be securities. In a letter dated 20th February, the authority cited the increasing interests from ventures seeking to host token sales in the country. This move is a follow-up on a warning that was issued in November 2017, elaborating on the risks involved with ICOs.

What the Strict Oversight Is all About

In the letter, BaFin indicates that strict examination of tokens will be conducted on a case-by-case basis to verify their legal status, rather than giving general rules that administrate the activity. The authority states that tokens can be of different financial instruments inclusive of stocks, derivatives or digital votes. The letter also advises new ventures with the intentions of launching ICOs to contact them, in order to find out the grey areas related to their ICOs, before they launch them. It also advises those offering tokens to ensure their offers are compliant with the German and European Union regulations. The authority wants all ICO operators to verify if they are dealing with any recognized financial instrument or security, to ensure they fulfill the necessary legal obligations with no major hiccups.

Is This the Global Trend?

The move by BaFin is seen as a global trend in applying strict and precise oversight rules in ICOs. Recently, Switzerland, through its Financial Market Supervisory Authority, announced tough measures to oversee ICOs in the country. Following the Swiss lead, Spanish legislators are in the process of drafting new laws to enhance ICO oversight as well. Gibraltar was the first country in EU to fully regulate ICOs. It is expected that other countries in the EU will follow suit and soon this may become an EU regulation. Meanwhile, ICOs remain banned in South Korea and China. Germany is at ,the forefront pushing for cross-European participation of an international debate on the regulation of cryptocurrency; to be held in March during the G20 summit in Argentina.

The frequency of ICOs and the ever-growing cryptocurrency market have drawn the interest of government authorities in the recent past. The guidelines on ICOs in different countries are being seen as a start of governments’ desires to regulate the crypto market. Time will tell whether they will succeed in this move.

What’s your take on the move by the German government to strictly oversee ICOs? Is this a good move for the cryptocurrency industry? Share your thoughts with us in the comments section.

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