German supervisor blocks cryptocurrency launch

20 Feb 2019 / 22:17 H.

FRANKFURT AM MAIN: German financial markets supervisor Bafin in late 2018 blocked a firm from raising cash by issuing a new cryptocurrency, a source familiar with the matter confirmed to AFP Wednesday.

First reported by business daily Handelsblatt, the decision affected German startup Rise, which wanted to raise US$120 million from investors to fund its AI-managed stock market trading scheme.

In exchange, the funders would have received digital tokens as part of a so-called “initial coin offering” (ICO) — a term playing on the more traditional label for a stock market flotation of “initial public offering” (IPO).

Bafin declined to comment on its move when contacted by AFP.

Run by entrepreneur Stefan Tittel, Rise on its website urges prospective clients to “invest like a billionaire”.

Its app allows users to trade in shares, options, indexes and cryptocurrencies — with the firm claiming the underlying AI technology makes for far higher returns than classic investing.

But the firm’s promise of massive returns — up to 675% over five years — drew Bafin’s critical eye.

German investors’ fingers were previously burned on Berlin cryptocurrency startup Envion, which went bankrupt in December after 30,000 people had thrown US$100 million at it.

Savers putting their nest eggs into an ICO should be “prepared to lose their entire investment,“ Bafin warned in a statement in late 2017, around the time fever for Bitcoin — the best-known cryptocurrency — was at its peak.

Prices crashed across the sector soon afterwards, reining in the gold-rush atmosphere around “crypto”.

Meanwhile the sudden death of the young president of Canadian cryptocurrency exchange QuadrigaCX in early February — taking to his grave the password to US$180 million in clients’ digital coins — has again underscored the risks. — AFP

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