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No Safety Net From Crypto Collapses, German Regulator Warns
The financial regulatory authority for Germany, BaFin, has toughened warnings about consumers potentially losing all their crypto investments, unlike holdings with regulated banks.
Investing in cryptocurrencies could mean you lose all your money because there's no state-sponsored protection, Germany's financial regulator BaFin said Monday, in a toughening of previous warnings to retail investors.
In Germany, whether you get your money back from failed crypto projects depends on the details of insolvency law and exact conditions of the service, BaFin said, in an amendment to a February warning on crypto investments.
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Recent collapses such as crypto lender Celsius Network have led to messy bankruptcy cases, where ex-customers must fight for their money back as part of lengthy legal proceedings.
If trading platforms or wallet providers turn south or go bust, "there is no protection covering customer losses, such as deposit guarantee schemes or investor compensation schemes," the statement from BaFin says. "Such systems do not exist for crypto assets."
In contrast, under European Union (EU) law, holdings with conventional banks are usually insured up to the value of 100,000 euros ($99,000), a move designed to protect consumers and prevent market panic turning into a bank run.
The EU recently struck a political deal on the Markets in Crypto Assets Regulation (MiCA) intended to regulate crypto and protect consumers, but it's not in effect yet. In the meantime, the bloc's financial watchdogs have warned potential buyers to be wary of get-rich-quick schemes that seem too good to be true.
Jack Schickler
Jack Schickler was a CoinDesk reporter focused on crypto regulations, based in Brussels, Belgium. He previously wrote about financial regulation for news site MLex, before which he was a speechwriter and policy analyst at the European Commission and the U.K. Treasury. He doesn’t own any crypto.
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Crypto Industry Asks President Trump to Stop JPMorgan’s 'Punitive Tax' on Data Access
A coalition of fintech and crypto trade groups is urging the White House to defend open banking and stop JPMorgan from charging fees to access customer data.
What to know:
- Ten major fintech and crypto trade associations have urged President Trump to stop big banks from imposing fees that could hinder innovation and competition.
- JPMorgan's plan to charge for access to consumer banking data may debank millions and threaten the adoption of stablecoins and self-custody wallets.
- The CFPB's open banking rule, which mandates free consumer access to bank data, is under threat as banks have sued to block it, and the CFPB has requested its vacatur.
