Companies have raised more than $3 billion this year through initial coin offerings (ICOs), a bonanza that hasn’t escaped the attention of financial watchdogs. Regulators haven’t quite figured out how to deal with the newfangled fundraising method, which blends elements of crowdfunding via cryptoassets and traditional initial public offerings. At a minimum, financial watchdogs around the world have issued warnings to investors about largely unregulated ICOs, highlighting a wide variety of risks:
Companies have raised more than $3 billion this year through initial coin offerings (ICOs), a bonanza that hasn’t escaped the attention of financial watchdogs. Regulators haven’t quite figured out how to deal with the newfangled fundraising method, which blends elements of crowdfunding via cryptoassets and traditional initial public offerings. At a minimum, financial watchdogs around the world have issued warnings to investors about largely unregulated ICOs, highlighting a wide variety of risks:
“ESMA is alerting investors of the high risk of losing all of their invested capital”—European Securities Markets Association (ESMA), Nov. 13, 2017
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“As these arrangements and the parties involved operate online and may not be regulated, investors may be exposed to heightened risks of fraud”—Hong Kong Securities and Futures Commission (SFC), Sept. 5, 2017
“The systemic vulnerability of ICOs to fraud, money laundering and terrorist financing increases the risk of investors losing the sums invested”—Germany’s Federal Financial Supervisory Authority, Nov. 9, 2017
“In the worst case scenario where no secondary market develops, a consumer may not be able to liquidate his token holdings at all”—Monetary Authority of Singapore (MAS), Aug. 10, 2017
“The documentation provided by the white papers and terms and conditions is often objectively insufficient, incomprehensible or even misleading”—Germany’s Federal Financial Supervisory Authority, Nov. 9, 2017
“If they are securities, the offer and sale of these virtual coins or tokens in an ICO are subject to the federal securities laws”—US Securities and Exchange Commission (SEC), July 25, 2017
“You are extremely unlikely to have access to UK regulatory protections”—UK Financial Conduct Authority (FCA), Sept. 12, 2017
Token sales are “illegal and disruptive to economic and financial stability”—People’s Bank of China, Sept. 4, 2017
