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Germany Grants BaFin License to Financial Firm for STO Platform

German regulator BaFin greenlights Black Manta Capital Partners to use its STO platform in the country.

Luxembourg-registered financial firm Black Manta Capital Partners has received a license from the German Federal Financial Supervisory Authority (BaFin) for its Security Token Offering (STO) platform.

A regulated STO platform in Germany

Black Manta Capital Partners announced on Aug. 19 that its Berlin-based entity received a MiFID II license by BaFin for its regulated STO platform on Aug. 1 nine months after filing. Now, the company will be able to offer regulated brokerage services using blockchain technology.

On its platform, the firm represents rights to an asset as tokens managed by on-chain contracts. This system reportedly allows for new access to capital for small and medium-sized enterprises, real estate projects, startups, commodity markets or funds and new access to investments for new investors.

A firm with global ambitions

The issuance of such security tokens is regulated in Germany by the MiFID II Directive on Financial Instruments, and the first STOs are planned to be conducted in early Q4 2019. The company has also broader ambitions:

“Apart from the licenced operating entity in Berlin, Black Manta Capital Partners drive the market launch of their investment platform also through BMCP Consulting in Vienna and BMCP Limited for international business development, based at the Malta Stock Exchange in Valletta.”

The firm also plans to found Black Manta Asia, in Singapore, and apply for a similar license with the local monetary authority. Co-founder and managing partner of the company commented on the firm’s intentions:

“While Black Manta Capital Partners want to be ‘boutique’ in its beginnings and run ‘handpicked’ STOs only, our strategy is global from day one: the first step is to link Europe and Asia on one blockchain-based investment platform. Therefore we look already today into Singapore.”

As Cointelegraph reported in July, Latin America’s biggest investment bank, BTG Pactual, plans to shift its security token offerings (STOs), a pipeline of over $1 billion in sales, onto the Tezos blockchain.

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Germany: Crypto Businesses will Require a BaFin License Next Year

Starting next year, new regulation will require German cryptocurrency businesses to hold a BaFin-issued license.

Starting next year, new Anti-Money Laundering (AML) regulations will require German cryptocurrency businesses to hold a Federal Financial Supervisory Authority (BaFin)-issued license, Cointelegraph Deutschland reported on July 24.

Possible innovation obstruction

Per the report, the new regulations will require cryptocurrency-related businesses such as exchanges and wallet providers to be licensed by BaFin and comply with AML regulation, since crypto assets will be considered a financial instrument starting on January 1, 2020. According to local media FAZ, Bundestag Free Democratic Party Frank member Schäffler commented suggesting that the government is hurting local innovation and forcing crypto businesses to move to other EU states.

Some welcomed regulatory clarity in Germany

On the other hand, Christian Schmies, partner of the law firm Hengeler Mueller, welcomed the regulation suggesting that more clarity will allow for further growth in the industry. According to him, “the technology has not yet been accepted by institutional investors because a reliable legal framework is missing.” While Schmies considers the classification as a financial instrument to be a step in the right direction, he also notes that the space still needs more clarity.

As Cointelegraph reported yesterday, BaFin recently approved an Ethereum-based real estate bond for security issuance firm Fundament Group.

The German Central Bank also noted in a recent statement that the potential benefits of Facebook’s Libra should not be suppressed despite regulatory uncertainty and potential risks.

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German Regulator Greenlights $280 Million Ethereum Real Estate Bond

Fundament Group announced that the German Federal Financial Supervisory Authority approved its Ethereum-based real estate bond.

The German Federal Financial Supervisory Authority (BaFin) approved an Ethereum-based real estate bond of security issuance firm Fundament Group. The company announced the news in a press release shared with Cointelegraph on July 23. 

Regulated real estate bonds on the Ethereum blockchain

The given bond backed by a portfolio of properties in major German cities with an issued volume of 250 million euros ($280 million). The firm’s solution reportedly leverages standardized and regulated financial instruments to build a real estate-backed asset that can be traded worldwide independently of banks.

Providing liquidity to real estate investments through tokenization

The company hopes that the project will bring more liquidity into the traditionally illiquid real estate market. Furthermore, this is also reportedly the first BaFin-approved real estate backed security token. Fundament Group co-founder Florian Glatz commented on the development, saying:

“As the first company to receive approval from the German Financial Market Authority for a blockchain-based real estate bond, we are excited to enter the sales process for the Real Estate Security Token, while already preparing the tokenization of other highly attractive assets.”

The company allegedly allows its customers to withdraw and deposit funds in Ether (ETH) and euros. Lastly, the release specifies that the firm focuses on properties located in major urban centers in Germany, including Berlin, Hamburg, Rostock, Jena and Fulda.

German authorities also showed openness towards blockchain and cryptocurrency. In a recent statement, the central bank noted that the potential benefits of Facebook’s Libra should not be suppressed despite regulatory uncertainty and potential risks.

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German Regulator Has No Info on ‘Cyber Incidents’ on German Crypto Trading Platforms

The Financial Supervisory Authority has no knowledge of fraud or market manipulation on crypto trading platforms in the country, but sees danger of money laundering.

Germany’s financial regulator has no knowledge of “cyber incidents” or market manipulation occurring on crypto trading platforms in the country, according to a press release on May 28.

The Federal Financial Supervisory Authority (BaFin) — the financial watchdog that oversees banks, financial services institutions and insurance services — responded to a question from the Free Democratic Party (FDP), a centrist political party in the country, concerning information on cyber attacks, fraud, money laundering and market manipulation involving crypto assets.

A translation of BaFin’s written response reveals that it does not categorize financial crimes any differently if cryptocurrencies are involved:

“Fraud involving cryptoassets is not reported separately in police crime statistics. The Federal Government has, beyond publicly known incidents, no information on fraud in the area cryptocurrencies and ICOs [initial coin offerings] in Germany or the European Union”

The regulator also noted that the same applies to market manipulation. However, BaFin did acknowledge the use of cryptocurrencies for money laundering, with specific reference to bitcoin (BTC):

“The Federal Criminal Police Office is aware of investigations and convictions for money laundering, in which illegal Bitcoin revenues from narcotics transactions on the darknet were washed through bank accounts, or in money laundering services that were offered on the darknet for illegal revenue from drug trafficking with a payout in Bitcoin.”

While using cryptocurrencies for money laundering remains a concern for many financial regulators around the world, a 2018 report from Japan’s National Police Agency found that virtual currency-related money laundering accounted for only 2% of all recorded cases.

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German Financial Watchdog Warns Public About Unauthorized Crypto Offering

BaFin, the German financial watchdog, has warned the public about a crypto offering that was allegedly operating without permission or oversight from regulatory authorities.

The German Federal Financial Supervisory Authority (BaFin) issued a warning Nov. 29 that a firm called Platin Genesis DCC is not authorized or approved by the proper authorities.

In the warning, BaFin states that Platin Genesis was advertising a “Platinum Coin Crypto Fund” on social media, which it claimed was “approved and released by BaFin.” The watchdog clarifies in its statement that this is not true.

Per BaFin, the firm does not have permission under section 34 of the German Banking Act to conduct banking activities or offer financial services. The firm is not under BaFin’s supervision.

The firm’s token “Platincoin” is listed on CoinMarketCap, and is trading at $4.48, down 1.11 percent on its daily chart at press time.

Earlier this month, BaFin ordered a partial cessation of activities of U.K.-based crypto-related firm Finatex Ltd. The firm was ordered to “immediately” put a halt to cross-border proprietary trading on its trading platform, Crypto-Capitals.

Finatex purportedly offered “options, contracts for difference (CFDs) on shares, indices, currencies and commodities,” without authorization by the German Banking Act.  

BaFin has maintained a hawkish stance toward ICOs, and has called for international regulations in the sector. Last month, BaFin chairman Felix Hufeld said that “the number (of ICOs) and the volume (of money) per ICO are both getting higher. Investors have mostly minimal rights.”

Referencing ICOs, Hufeld recommend private investors to “keep away from such things” adding that discussions on ICO regulations were underway in “multiple international forums.”

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Blockchain Is 'Revolutionary,' Says German Finance Regulator Chief

Felix Hufeld, chief of Germany’s financial watchdog, has said blockchain technology is “revolutionary” and its applications could turn the entire financial sector “upside down.”

Hufeld, who is president of the German Financial Supervisory Authority (BaFin), made the remarks during a speech at an event in Berlin last week in which he described the regulator’s thinking on bitcoin and blockchain.

Despite the current hype, “if not a bubble,” around the bitcoin price and the boom of initial coin offerings (ICOs), he said, blockchain’s ability to power distributed applications “could actually be revolutionary.”

He continued:

“These apps are not only safe from failures of individual computers or providers, they also promote the development of a ‘blockchain economy.'”

Further, the BaFin head said blockchain applications have promise in areas that lack “an effective control mechanisms or trustworthy institutions” such as in foreign trade or development aid.

The speech follows remarks by Hufeld in April, in which he stated that he does not want to “kill innovation” in blockchain, though his agency is beefing up efforts to regulate cryptocurrency trading over money-laundering concerns, according to a report at the time.

BaFin also issued new guidelines in February outlining how and when it would consider tokens issued during ICOs to be securities, saying it would take a case-by-case approach in determining the legal status of individual tokens.

BaFin image via Shutterstock

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German Regulator Pledges 'Precise' Oversight of ICOs

Germany’s financial markets regulator has issued new guidance on how it will classify tokens sold during initial coin offerings (ICOs), including those it will consider securities.

On Feb. 20, the Federal Financial Supervisory Authority (BaFin) issued a letter of advice, announcing the move in light of an influx of inquiries from businesses looking to host token sales within Germany. The move follows its warning in late 2017 regarding the risks associated with investing in ICOs.

The letter (of which an English version is not currently available) reveals that BaFin will conduct a “precise case-by-case examination” of tokens to determine their legal status, instead of issuing broad rules that govern the activity. It says that tokens can represent various financial instruments, including stocks, derivatives and digital representations of voting rights.

The agency also used the letter to offer some advice to startups looking to launch ICOs: get in touch. It advises token offers to ascertain whether their respective products fall under existing national and EU-wide regulation.

BaFin also encouraged businesses to be aware of the regulatory grey-area of ICOs and tokens, advising them to get in touch with its offices prior to launching a sale.

Image Credit: Jan von Uxkull-Gyllenband / Shutterstock.com

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German Regulator Orders Crypto Exchange to Halt Brokerage Business

German Financial Supervisory Authority (BaFin) has ordered Crypto.exchange GmbH, a Berlin-based exchange, to immediately stop acting as a financial broker.

The order was issued after the exchange advertised on its website, btc-now.de, that it would sell customer’s bitcoins for euros and sell them on a stock exchange, says BaFin in a statement. The firm claimed the purchase price would be transferred to the investors within 30 minutes, it adds.

According to BaFin, the financial commission business operated by Crypto.exchange GmbH is not authorized by the regulator. The financial watchdog took the decision after users claimed that they did not receive any money for cryptocurrency that was transferred to the firm, Bloomberg states.

“The BaFin order is immediately enforceable by law, but not yet final,” said the release. At press time, the btc-now.de website was not operational.

Back in April, BaFin moved to shut down a payment processor tied to to the OneCoin cryptocurrency scheme, a digital currency service that has faced widespread allegations of fraud, and has been fined 2.6 million euros in Italy.

Weeks later, BaFin issued new cease-and-desist orders to two holding companies connected to OneCoin, ordering the companies to “dismantle their internet based OneCoins trading system.”

Editor’s Note: Some of the statements in this report have been translated from German. 

Euro image via Shutterstock

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Germany's Securities Regulator Warns ICOs Pose 'Numerous Risks'

Germany’s top finance regulator has issued an investor warning on initial coin offerings (ICOs), becoming the latest markets watchdog to comment on the blockchain use case.

The Federal Financial Supervisory Authority (BaFin) said today that investors should be wary of the “numerous risks” involved in token sales, including “the possibility of losing their investment completely.” The agency added that the funding model – through which blockchain-based tokens can be sold and distributed in an effort to bootstrap a new network – is “attracting fraudsters” who may misrepresent their efforts to prospective backers.

BaFin stated in the release:

“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.”

The release followed a report in local media that indicated BaFin was preparing some kind of statement, though unlike those issued by other regulators from around the world, the agency’s statement stops short of imposing any new requirements or guidelines for organizers. A more comprehensive guide for investors will be released on Nov. 15, according to today’s announcement.

“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,” the regulator warned.

Though BaFin didn’t indicate that it might seek enforcement action against any ICO organizers – as has happened previously in countries like the U.S. – the agency suggested generally that “authorities taking necessary measures” could result in potential losses for investors in token sales that prove to be fraudulent in nature.

Image Credit: Jan von Uxkull-Gyllenband / Shutterstock.com

The leader in blockchain news, CoinDesk is an independent media outlet that strives for the highest journalistic standards and abides by a strict set of editorial policies. Have breaking news or a story tip to send to our journalists? Contact us at news@coindesk.com.