Germany’s top financial regulator, the Federal Financial Supervisory Authority (BaFin) has issued a warning to investors bout the risk of investing in initial coin offerings (ICOs). This move makes BaFin the latest market watchdog to issue a warning on ICOs.
In its statement, BaFin warned investors about the various risks involved in ICOs and token sales.
Among the risks is the possibility of losing one’s entire investment. The agency also warned that the ICO as a funding model can “attract fraudsters” who may misrepresent their projects to prospective investors.
Part of the statement reads:
“Due to the lack of legal requirements and transparency rules, the consumer is left on their own when it comes to verifying the identity, reputability and credit standing of the token provider and understanding and assessing the investment on offer. It can also not be guaranteed that personal data will be protected in accordance with German standards.”
BaFin’s other plans
The regulator also warned that before they decide to take part in an ICO, consumers should make sure that they fully understood the benefits, as well as the risks of the investment or project. It further added that taking the necessary measures against ICOs may result in possible losses for investors in token sales that prove to be fraudulent in nature.
“Before any consumer decides to participate in an ICO, they should make certain that they have fully understood the benefits and risks of the project or investment.”