FCA issues consumer warning on ICOs

FCA issues consumer warning on ICOs

FCA issues consumer warning on ICOs

On Tuesday, the United Kingdom watchdog shone a light on the largely unregulated ICO space, calling the investments "very high-risk" and "speculative".

Sometimes thought of as a digital corollary of an initial placement offer (IPO), ICOs see issuers provide prospective investors with a proprietary coin or token related to a specific firm or project, in exchange for cryptocurrencies.

Initial Coin Offerings (ICO) raise money for a specific project or company through the issue of a physical coin in exchange for a cryptocurrency, such as Bitcoin or Ether.

The commission said that investors should seek legal or professional advice and fully understand the features of an ICO plan before investing in it. Investors should also be aware that ICO plan operators issue a whitepaper, which typically contains descriptions of the ICO, but may also carry disclaimers which absolve the operators from certain responsibilities and obligations.

Tougher Sanctions Enacted Against North Korea
While the U.S. and China agree the Korean peninsula should be rid of nuclear weapons, they differ on how best to achieve that. These were pointed out as major goals of the sanction by a U.S. official who is familiar with the terms of the negotiation.

Other highlighted risks included the fact that most ICO projects are in very early stages of development and operate experimental business models.

The vast majority of ICOs are not regulated by the FCA and many are based overseas, making it extremely unlikely for investors to have access to regulatory protections like the Financial Services Compensation Scheme or the Financial Ombudsman Service.

In its latest statement, the FCA restated that the regulation of ICOs in the United Kingdom "can only be decided case by case". "Some tokens may also constitute transferable securities and therefore may fall within the prospectus regime". Each promoter needs to consider whether their activities amount to regulated activities under the relevant law. Over $1.5 billion has been raised through ICOs so far this year. "Comments such as "many ICOs will fall outside the regulated space" and "you are extremely unlikely to have access to United Kingdom regulatory protections like the Financial Services Compensation Scheme or the Financial Ombudsman Service" are not firm affirmations that investors will not have recourse to regulatory protection".

Related news