Germany's financial regulatory authority, BaFin, has issued a statement warning consumers on the risks of ICOs and digital currency offerings.
In a formal statement on its website BaFin said ICOs are a ‘highly speculative investment' that carry ‘substantial risk.'
A particular note to consumers read: "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 systemic vulnerability of ICOs to fraud, money laundering and terrorist financing increases the risk of investors losing the sums invested, all the more so due to the possibility of authorities taking necessary measures against operators or other persons or enterprises that are involved in such illegal dealings,” the statement reads.
The agency warns consumers to make certain that they have fully understood the benefits and risks of the project or investment before deciding to participate in an ICO.