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UAE Regulator Warns Residents Over ICO Investment Risks

Last Updated March 4, 2021 5:04 PM
Samburaj Das
Last Updated March 4, 2021 5:04 PM

The UAE’s financial markets watchdog and regulator has ‘raised the alarm’ over initial coin offering (ICO) investments.

In a circular published on Sunday, the UAE’s Securities and Commodities Authority (SCA) urged investors to be wary of risks associated with investments into ‘all digital, token-based fundraising activities or investments schemes’ in the Emirates.

Certain ICOs aren’t regulated and are therefore open to risks of fraud, the authority said. ICOs that are issued abroad and are subject to their jurisdiction’s laws will prove difficult to track and recover funds in the scenario of a collapse, the warning read.

As such, the agency moved to remind investors that it does not recognize nor regulate any ICOs. Investors participating in ICO activity will be doing so at their own risk without any legal consumer protection, the SCA said. Trading of tokens issued through ICOs or presales could prove volatile on secondary markets, the watchdog added.

Furthermore, investors are also open to risks related to unaudited ICO information, giving them a false sense of the token they are buying into. An excerpt from the notice read:

ICO information made available to investors may be unaudited or incomplete and may present a given investment case in an unbalanced and misleading manner (by emphasizing the potential benefits while overlooking risks, for example).

The circular follows clear guidelines released by UAE capital Abu Dhabi on cryptocurrency and initial coin offerings in October. Deeming cryptocurrencies as commodities and ICOs as securities, Abu Dhabi’s financial markets regulator underlined the “incredibly diverse ICO market” to contain “some ICOs which constitute high risk.” In nearby Dubai, a financial markets regulator also issued its own ICO-related warning in October, deeming them “high-risk investments.”

The UAE watchdog joins a number of other global counterparts in recent months to have issued warnings to residents on risks related to investments in ICOs.

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