Bitcoin is one of the most prominent virtual currencies. It started as an open source project of the anonymous creator Satoshi Nakamoto and continues to be further developed even today by a core of employees who work on the program code on a voluntary basis.
From the outset, the developers of the cryptocurrency Ether (Ethereum project) opted for a new model of project financing: the Initial Coin Offering (ICO).
An ICO is a sale of units (tokens) of a virtual currency which is still in a very early phase of its development or even at the stage of a theoretical white paper only. Commonly, these tokens are sold against Bitcoin (BTC) or Ether (ETH) instead of national currencies like euros or U.S. dollars.
Proceeds go to the project developers and are intended to ensure financial sustainability of the further development of the cryptocurrency on offer. The largest ICO to date, the sale of the EOS token, generated more than USD 4.2 billion worth of virtual currencies for developers (source: decrypt.co).
An ICO thus has similarities to a traditional IPO of a company, combined with elements of crowd investing.
Many German blockchain startups are also interested in conducting an ICO, which is why the question arises as to how an ICO should be evaluated under German law from a regulatory perspective. In particular, the questions of a permission requirement by the German Federal Financial Supervisory Authority (BaFin) as well as those regarding a possible prospectus requirement for tokens offered in an ICO are in the foreground.
The extent to which the token to be issued is regulated by BaFin depends on its technical design in each individual case. The BaFin distinguishes between three categories of tokens:
Anyone wishing to conduct an ICO cannot circumvent German supervisory law even if the registered office of the company offering the tokens is located in Switzerland, for example. This is because BaFin assumes in its constant administrative practice that a domestic reference of an issuance and thus the applicability of German supervisory laws is also given if the issuer is located abroad but addresses the German market and German investors in a targeted manner.
This can already be affirmed if the website for the ICO is also made available in German or is actively advertised in German-language internet forums.
The belief heard here and there in the blockchain community that ICOs are an unregulated way of raising capital quickly is therefore not true in this generality.
However, the German Capital Investment Act (Vermögensanlagengesetz, VermAnlG) provides for various exceptions where the prospectus requirement and the further obligations for the ICO provider can be circumvented in whole or in part: