Germany’s financial regulator issues retail crypto investment warning

The German Federal Financial Supervisory Authority (BaFin) has warned investors about the risks of investing in cryptocurrencies.

In a consumer protection warning posted on its website on Friday, the regulator warned against crypto complicity by retail investors.

In its statement, BaFin joined similar warnings from several European regulators, including the European Securities and Markets Authority and the European Banking Authority.

According to BaFin, retail investors should be aware of the risk that they could suffer 100% loss with their crypto investments.

While European lawmakers are still working on a pan-European regulatory framework for virtual currencies, German regulators have already created a legal framework for digital assets.

Crypto currency providers, exchanges and other companies can only operate in Germany with a BaFin licence. As Cointelegraph previously reported, the country has legalized digital securities as of December 2020.

With a fairly clear regulatory framework for cryptocurrencies in Germany, some banks in the country have even requested permission to offer storage solutions for cryptocurrencies.

In December 2020, the 224-year-old German bank Hauck & Aufhäuser announced its intention to establish a fund for cryptocurrencies.

Despite these laws, BaFin says there is a loss of protection for retail customers in the cryptocurrency space, hence the warning.

Crypto investment alerts are a popular phenomenon with financial regulators around the world, especially in light of the current bull market. Unlike traditional finance, which imposes criteria on qualified investors, the cryptocurrency market offers easier ways for individual investors to participate in the market.

In 2021 alone, regulators in South Africa, the UK and even Thailand issued similar warnings. In February, Thailand’s finance minister criticized the current wave of crypto currency speculation and warned of the possibility of significant losses for small investors.

Meanwhile, the European Commission’s legislative proposal on crypto asset markets continues to worry industry players.

In early March, Trusted Blockchain Applications International released a detailed report based on surveys and engagement with cryptocurrency industry players indicating that certain provisions of the MiCA are detrimental to the growth of startups.

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