ICO Regulations in GERMANY - OiX Exchange

Germany is an economic powerhouse. It is the country that leads the future of EU at least when the economy is consideration. In such a scenario it is correct to surmise that any initiative taken by Germany will be followed up eventually by EU. Germany has recently announced that they are recognizing Bitcoin as a Legal Tender. This is big news, biggest in recent times when it comes to legitimization of cryptocurrency.

1. Germany made Bitcoin a Legal Tender.

Germany’s finance ministry has brought Bitcoin a step closer to legalize by proclaiming it as a unit of account, allowing it to be used as the legal currency for tax and trading purposes. Parliament member Frank Schaeffler said that identifying the virtual currency under the country’s banking rules symbolizes an initial step towards deregulating the production of money and hopes that the government doesn’t hamper with its success.

1. ICO as financing method in Germany:

The developers of the virtual currency Ether opted for a new model of project financing. An ICO is a sale of tokens which is still in an initial phase of its development. Usually, these tokens are traded against bitcoin (btc) or ether (eth).

Proceedings go to the developers of the project and are expected to make sure the financial sustainability of the development of the virtual currency. The largest ICO to the date is the sale of the Bancor token which brought its developers’ virtual currencies in a comparable value of $150 million USD or more.

1. Issue of tokens in Germany are subject to regulations:

An ICO surely has resemblance with a traditional IPO of a company and combined with some elements of crowdfunding. Many German blockchain foundations are interested in executing an ICO, that raises the question of how to evaluate an ICO in terms of regulations under German law.

In this situation, the question arises is whether the Federal Financial Supervisory Authority has the authority to allow or deny the permission and if a catalogue is needed for the tokens offered in an ICO.

Regulatory guidelines under the Payment Services Supervision Act can also be ruled out if no transfer of amounts of national money is involved.

Moreover, no catalogue will be required for the tokens offered by the way of an ICO under the German Securities Prospectus Act because the virtual currencies do not accept the definitions that are established in the Securities Trading Act.

1. Possible prospectus requirement under Asset Investment Act:

Nevertheless, the principles under the Asset Investment Act may apply and could call for a catalogue requirement for an IPO. In this situation, the structure of the tokens offered in the ICO will be influential.

A perception is to be made between simple tokens, the plain vanilla products, which do not designate their holders to any rights apart from the ownership, and the tokens empower their holders with an additional agreement right for the other tokens in conformity with the specific rules.

There are many technical possibilities for granting subscription rights with tokens. The plain vanilla tokens will barely be classified as an asset investment, While the tokens with additional features might be considered as asset investments agreeable to Sec. 1 (2) №1 of the German Asset Investment Act, if the holder of the tokens receives distributions, that are based on the performance of the issuing company and paid according to specific rules. The features of the actual tokens are considered critical for the legal categorization of an ICO under German law.

1. ICO under German law:

The Companies that wish to issue an ICO in Germany, cannot mislead or fool the German supervision laws, for instance, by founding the registered office of the company that is offering the tokens in Switzerland. Because Federal Financial Supervisory Authority, assumes that a domestic core of an issue applies and, thus, the German supervisory laws are useful even to the issuers based abroad if they deliberately address the German market and German investors. This may be the case if the website related to the ICO is also made available in German or if it is actively promoted on German internet forums.