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By Lutz Auffenberg
WINHELLER Attorneys at Law & Tax Advisors
Frankfurt, Germany

Recently, numerous start-ups have raised substantial amounts of money as funding for their business ideas through so-called initial coin offerings (ICOs). Essentially, these companies create their own cryptocurrency and sell its tokens to interested investors. The tokens as such confer no decision-making powers or subscription rights. Buyers can only hope for an increase in value on the free market.

Regulation of ICOs Remains Questionable

Presently, regulatory authorities around the world are working meticulously on an appropriate and suitable regulation for ICOs. Basically, even in a global context, the capital market supervisory authorities’ declared objective is to ensure the highest possible degree of transparency and investor information in all capital market issues. Providers of capital market products, for example, are often required to publish a sales prospectus in advance.

Many countries in the world are now feverishly examining whether or not the existing capital market rules also apply to ICOs. While the People’s Bank of China reacted by imposing a general ban on ICOs, supervisors in the US and Canada expressed a more generalized opinion pointing out that ICO tokens might be considered as “securities” in individual cases.

The German Federal Financial Supervisory Authority Still Remains Silent on the Topic

The competent capital market supervisory authority in Germany Bundesanstalt für Finanzdienstleistungsaufsicht (BaFin) has not yet commented on the new phenomenon of ICOs. Some types of tokens endowed with additional financial participation rights might fall within the capital markets regulation under the currently applicable German rules. WINHELLER is presently coordinating the treatment of ICOs in accordance with German capital market supervisory law for several clients. Our experienced attorneys assist you in planning and implementing this fascinating new financing method in a legally compliant way. We look forward to hearing from you!