German financial regulator BaFin is warning investors against doing business with Bulgarian cryptocurrency broker 5 Capital, which it said is operating in Germany unlicensed. BaFin had prohibited 5 Capital from being able to operate within the country as they have been unlawfully issuing contracts for difference (CFDs), which have been structured in such a way as to expose customers to the volatility of some cryptocurrencies. The regulator recently discovered that the Bulgarian based broker has been offering these services without the appropriate license. They have been directing clients to refer to their website which is run by their parent company, 21TEX, to perform their transactions. Crypto firms that are operating in Germany are required to apply for a license from the BaFin by the end of 2019 as part of the new Anti-Money Laundering (AML) regulations. While derivatives referencing crypto assets do not constitute cryptocurrencies, they still fall under the regulatory authority of the BaFin, and companies were required to seek a license from the German regulatory agency as a result. That has not occurred. This is not the first firm to be hit with sanctions by the BaFin. Last week, the regulatory agency issued an order against Karatbit Foundation that they were to immediately terminate all operations not sanctioned by the BaFin. The regulator's action against Karatbit was required immediately, but it does not look like the agency has taken the same stringent moves against 5 Capital. At this point, they are just advising customers not to do business with this organization. Why this difference has occurred has not been specified, and may suggest that 5 Capital is heeding the warning and intends to file for the appropriate license. In its role to supervise the financial markets in Germany and to enforce compliance with all rules and regulations, the BaFin has issued several advisories in recent years. They have primarily been focused on brokers that are not offering negative balance protection, exposing their clients to unlimited losses.