European Securities and Markets Authority (ESMA) issued two same-day warnings concerning initial coin offerings (ICO) on 13 November after the preceding weekend was witness to dramatic swings in prices and volatility. One release is geared toward investors and the other is aimed at participating firms.
ESMA Warns ICO Investors
In what might be taken as a response to a rollercoaster weekend for cryptocurrency markets, where bitcoin cash traded places with ethereum, and bitcoin shed billions, ESMA has issued two same-day statements regarding ICOs.
Dated 13 November 2017, ESMA50-157-829 focuses its attention on investors. “If you are considering investing in ICOs or have already done so, be aware of the many risks this may entail,” ESMA begins, “including the total loss of your investment. In particular, be aware that you will have no protection,” they note.
ICOs are indeed largely unregulated in the traditional sense, having gained great traction this year as at least a tail in the price-comet that is bitcoin.
“ESMA has observed a rapid growth,” they write, “and is concerned that investors may not realise the high risks that they are taking.” “ICOs are highly speculative investments,” and “depending on how they are structured, may fall outside of the regulated space, in which case investors do not benefit from the protection,” they reiterate.
The regulatory arm is one of the three European Supervisory Authorities within the European System of Financial Supervisors bureaucracy.
They continue, “ICOs are also vulnerable to fraud or illicit activities, owing to their anonymity and their capacity to raise large amounts of money in a short
timeframe.” Risks include the above along with money laundering, losing one’s entire capital, lack of exit options and price volatility, inadequate access to information, and fundamental flaws in early, untested technologies, the body urges…
Read Full: European Union Issues Two ICO Warnings