Germany’s top financial regulator today warned of the dangers posed by offshore brokers that continue to chase online trading business, including within the gray area of the country’s cryptocurrency sector.
BaFin has specifically marked another firm with the red flag. The independent regulator highlighted that a company called CoinsTrades is running an illegal business while having not acquired proper authorization. The firm under BaFin’s firm offers German customers CFDs that allegedly give them exposure to FX and cryptocurrency instruments.
“The operator of the platform is thus conducting proprietary trading dealing on own account within the meaning of section 1 (1a) sentence 2 no. 4 (c) of the KWG on a commercial basis. Neither the trading platform nor its operator hold the authorisation required under section 32 (1) of the KWG and are therefore conducting unauthorised business,” the watchdog further explains.
According to the BaFin’s intel, the regulator suspects CoinsTrades to be a suspicious company as they use contract documents marked with the BaFin logo. This gives the impression that it is legitimized in Germany, which has never been true.
The company goes even far with its pledges on its website, stating that it offers powerful strategies that make trading with them outstandingly risk-free.
According to the watchdog, CoinsTrades claims to be located in Frankfurt with offices in Germany, Austria and Switzerland, which seems untrue. Either way, the financial regulator further urged its citizens to be careful and follow due verification processes, check the company’s identity (identity details, country of establishment, etc.), and never to trust a company if it cannot be clearly identified.
To prevent such practices, BaFin issued several guidelines that encourage potential investors to be wary of promises of disproportionate returns. A guaranteed investment with a high return that considerably exceeds the market return is often too good to be true, it says.
In an attempt to keep up with the rise of the crypto market, including the number of trading platforms and users, BaFin has been adamant in its warnings toward investors, elaborating on the potential risks associated with the booming industry.
Crypto firms operating in Germany have to apply for a license to the nation’s financial watchdog BaFin since the end of 2019 when the new Anti-Money Laundering (AML) regulations came into effect. Although derivatives referencing cryptoassets would not fall under this suggestion, they remain subject to ESMA’s current restriction and any future proposals by the BaFin regarding the sale of these instruments to retail investors.