BaFin ICO and Crypto Token Classification Guidance

BaFin’s first advisory letter states that its Securities Supervision/Asset Management Directorate assesses tokens case by case. Depending on the structure, a token may be a financial instrument under the German Securities Trading Act (WpHG) or MiFID II, a security under the German Securities Prospectus Act (WpPG), or a capital investment under the German Capital Investment Act (VermAnlG).

This means the guidance is most relevant to token issuers, ICO organisers, trading venues, brokers, advisers, custodians, and other firms whose business model touches token issuance or secondary-market activity in Germany. It does not say that every token is a security or that every ICO is prohibited. Instead, it frames a classification process that can lead to different legal consequences depending on the rights attached to the token and the activities carried out around it.

BaFin emphasises that a token’s classification requires a precise assessment of the individual facts. The label “utility token” is not decisive if the token’s rights and market features point toward a regulated financial instrument. The analysis focuses on the token’s transferability, negotiability, embedded rights, payment function, and relationship to existing statutory categories.

A token may be treated as a security if it is transferable, negotiable on the financial or capital market, embodies rights comparable to shareholder rights or creditor claims, and is not a payment instrument. BaFin also states that certificated paper form is not required; documentation through distributed ledger or comparable technology can be sufficient for holder identification.

The 2019 crypto-token guidance supplements the earlier classification letter by addressing prospectus and authorisation questions for token issuance. It also reflects BaFin’s administrative practice of using broad token categories, including utility tokens, payment tokens, and security-like tokens, as an initial screen while still requiring individual assessment.

• Utility-style tokens may raise fewer financial-regulatory issues where they function like access or usage rights rather than investment claims.
• Payment tokens may be relevant under German banking-law concepts, particularly where token-related services are provided commercially.
• Security-like tokens can trigger prospectus, securities-law, market-abuse, or licensing analysis where they convey asset-like rights.