In joining the growing list of regulators around the world, the UK’s Financial Conduct Authority is the latest to issue a public consumer warning on the risks of initial coin offerings or ICOs.
With a statement today, the FCA warned consumers that “ICOs are very high-risk, speculative investments” while adding “[be] prepared to lose your entire stake.”
The UK’s top financial watchdog urged investors to ‘fully research” the project offering ICOs and recommends only experienced investors to invest and buy digital tokens from an ICO project. In detailing the primary risk it sees as inherent in ICOs, the FCA warned most projects are not regulated and are based abroad. As a result, investors are “extremely unlikely” to have the safety net of UK regulatory protections. The potential for fraud, inadequate documentation and extreme price volatility of a digital token bought in exchange for cryptocurrencies are all listed as additional risks.
The FCA notably added:
[D]igital currency exchanges that facilitate the exchange of certain tokens should consider if they need to be authorized by the FCA to be able to deliver their services.
The warning follows a slew of other similar notices from the FCA’s regulatory counterparts including Malaysia’s Securities Commission; the Monetary Authority of Singapore, the country’s central bank; the Securities and Futures Commission of Hong Kong; the Bank of Russia, the Russian Federation’s central bank; the U.S. Securities and Exchange Commission and; the People’s Bank of China, China’s central bank.
Chinese financial regulators enforced a sweeping ban on all ICOs last week, the most dramatic move yet by a state authority against the radical new form of fundraising enabled by cryptocurrencies.
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