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BaFin Confirms Regulatory Exemption of Utility Tokens in Germany

In the past, we already reported about so-called Initial Coin Offerings (ICO) that may be a suitable alternative source of corporate financing. Until recently, however, the regulatory situation was uncertain. The Federal Financial Supervisory Authority (BaFin) had already classified Bitcoins as units of account thereby subjecting them to the regulation of the German Banking Act. Since then, it was unclear whether issuing own crypto-currencies would also fall under the BaFin’s supervision.

Now BaFin has clarified that apart from Bitcoin, which it qualifies as so-called currency tokens, it also recognizes security tokens and utility tokens. Security tokens are considered to be the digital counterpart of shares, bonds or similar conventional financing methods. Utility tokens, on the other hand, are cryptocurrencies that may be used solely within the issuer’s network. For example as an exclusive currency of an online auctioneer.

ICOs – A proven method for raising capital

While security tokens are subject to the same regulation as their respective analogue counterparts, according to BaFin, utility tokens are generally exempt from regulation. This offers companies the opportunity to raise capital from the public without having to clear the hurdles of a prospectus approval. In the past, German companies like Savedroid have already proven that tens of millions of euros may be raised through an ICO.

Companies that wish to pursue this opportunity, should first develop a smart strategy. In order to ensure that a company’s own cryptocurrency tokens are classified as utility tokens exempt from regulation, they must be integrated into the company’s business model. In addition, tax issues will need to be considered. WINHELLER’s experts will be pleased to assist you and to provide comprehensive advice to ensure that you and your company can also implement a successful ICO. You can reach us by phone at +49 (0)69 76 75 77 80 or by sending an e-mail to info@winheller.com.

Continue reading:
How Does Financing a Start-up Through an ICO Work in Germany?
Regulatory issues relating to German ICOs

Benjamin Kirschbaum

Benjamin Kirschbaum

Attorney Benjamin Kirschbaum, based at our Berlin office, mainly works on matters relating to blockchain and cryptocurrencies. In this field, he offers our clients comprehensive advice on all aspects of tax law, financial supervision, and civil law. In addition, Benjamin Kirschbaum works on matters relating to general civil law, administrative law, canon law and the law on religions.

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