12 September, 2017
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In the United Kingdom, meanwhile, the Financial Conduct Authority this morning issued a warning to consumers, via a press release, about "the risks of initial coin offerings", noting that they "are very high-risk, speculative investments", and "you should only invest in an ICO project if you are an experienced investor, confident in the quality of the ICO project itself (eg business plan, technology, people involved), and prepared to lose your entire stake".
Last week, the People's Bank of China banned blockchain startups raising funds via ICOs.
The majority of ICOs are based on the Ethereum network.
"Businesses involved in an ICO should carefully consider if their activities could mean they are arranging, dealing or advising on regulated financial investments", it said. "It would be hard to verify the authenticity of the scheme and the recovery of foreign-invested monies may be subject to foreign laws or regulations". Additionally, the warning noted cryptocurrencies' intrinsic price volatility and the potential for fraud. Instead of issuing a regulatory prospectus, ICOs issue a "White Paper" that may be unbalanced, incomplete or misleading.
- ICO "White Papers" may be unbalanced, incomplete or misleading.
The FCA said: "A sophisticated technical understanding is needed to fully understand the tokens' characteristics and risks".
Early stage projects: Typically ICO projects are in a very early stage of development and their business models are experimental.
The Financial Conduct Authority has become the latest to sound the alarm on fundraising in cryptocurrencies, warning investors there is a "good chance" they could losing everything in the unregulated market. During an interview with Chinese television network CCTV-13, Bing explained that last week's "ban" isn't actually a ban at all - ICOs have simply been "paused" while the government hashes out the appropriate regulations.
The notice may also serve as a warning to potential issuers however, saying that the decision on whether individual issues are within the FCA's remit will be made on a "case by case" basis.