Germany's Federal Financial Supervisory Authority (BaFin) has issued a letter on the regulatory classification of tokens issued via Initial Coin Offerings (ICOs) or token sales.

The regulator said that it has been increasingly receiving inquiries from investors as to whether the tokens distributed via ICOs should be considered as financial instruments.

“[BaFin] has now issued a letter of advice in which it comments on the regulatory classification of tokens in the area of ​​securities supervision. This applies to all market participants who provide services in relation to tokens, act with them or publicly offer tokens,” it said.

BaFin further said that to ensure full compliance with legal requirements, market participants are required to check closely the existence of a regulated instrument, such as a financial instrument or a security. If the parties are unclear about any aspect they should contact its specialist departments at an early stage.

The letter follows a warning on ICOs from BaFin in November 2017. It cautioned investors saying ““ICOs are a highly speculative form of investment. Investors should therefore be prepared for the possibility of losing their investment completely.”

Recently, the Swiss Financial Market Supervisory Authority FINMA has published its guidance on how it intends to apply financial market legislation to the field on ICOs. Last month, The Russian Ministry of Finance published a draft federal law on the regulation of digital assets and token offerings.