UK Financial Conduct Authority Doles Out ICO Warning for Investors

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The UK Financial Conduct Authority is next in a line of national regulators to issue a statement on Initial Coin Offerings. This morning at 11am UK time they released a formal announcement on their position.

You should be conscious of the risks involved … and fully research the specific project if you are thinking about buying digital tokens. You should only invest in an ICO project if you are an experienced investor, confident in the quality of the ICO project itself (e.g. business plan, technology, people involved) and prepared to lose your entire stake.

ICOs are very high-risk, speculative investments.

You should be conscious of the risks involved (highlighted below) and fully research the specific project if you are thinking about buying digital tokens. You should only invest in an ICO project if you are an experienced investor, confident in the quality of the ICO project itself (e.g. business plan, technology, people involved) and prepared to lose your entire stake.

Jakob Drzazga co-founder of Brickblock, which has an ICO scheduled for next month, commented:

“To be honest this warning by the FCA should come as no surprise. The hype around the ICO market has grown very rapidly in recent months and there are inevitably some less robust projects out there. It’s critical for the success of the whole area that regulators keep a careful eye on this, and we strongly urge people to be conscious of the risks and thoroughly research any project before considering buying tokens.”

Unperturbed, the cryptocurrency markets continue to rise.

Commenting on the warning issued today by the FCA regarding initial coin offerings (ICOs), Bradley Rice, senior associate at law firm Ashurst said:

“It’s no surprise that the FCA has decided to issue a public statement on the regulatory status of ICOs. In the wake of other international regulators setting out their views on ICOs (or indeed banning them), the FCA is at pains to emphasise that the regulatory status of ICOs will depend on how they are structured. The FCA doesn’t want to inhibit technological development but it is making very clear that the line between an unregulated token offering and the marketing of a security, crowdfunding activity or even a collective investment scheme is very thin.”

Luke Scanlon a Fintech lawyer at international law firm Pinsent Masons comments:

“While the FCA has made it abundantly clear that ICOs can be high risk they have also made statements that may be taken as positive about the future of the ICOS such as “Many ICOs will fall outside the regulated space” and “You are extremely unlikely to have access to UK regulatory protections like the Financial Services Compensation Scheme or the Financial Ombudsman Service” rather than a firm affirmation that you will not have recourse to regulatory protection.

“Given the recent explosion in ICOs it is understandable that the FCA has produced a one-page statement. However, those seriously investigating their future as a means of raising funds and investing will need to wait for the regulator to publish a more detailed analysis of the nuanced questions it raises or asks investors to consider, before moving forward with a sufficient amount of certainty.”

Here’s a list of other regulatory announcements, compliments of the brilliant Tim Swanson, at the Great Wall of Numbers Blog. 

  • Brazil’s equivalent of the SEC, the Comissão de Valores Mobiliários (CVM), published (July 13th) initial legislation instruction (Instrução CVM No. 588) regulating crowdfunding via ICOs: (Portuguese announcement)
  • The United States SEC published on July 25th on ICOs: (Report on investigation) (Investor bulletin) (Investor alert)
  • Monetary Authority of Singapore published its views on August 1st on ICOs: (Clarification statement) (Consumer advisory)
  • Canadian Securities Administrators (CSA), including the Ontario Securities Commission, published its views on August 24th on ICOs: (Staff Notice)(Announcement)
  • Israel Securities Authority announced on August 30th that it is forming a committee to look at ICOs: (Hebrew announcement) (English)
  • The Financial Supervisory Commission (FSC) in South Korea announced on September 3rd that it held a joint task force meeting to strengthen regulations around digital currency trading, including fundraising with ICOs: (BusinessKorea)
  • Central Bank of Russia issued a public statement on September 4th that included its views on ICOs: (Russian announcement) (English)
  • The People’s Bank of China, along with 6 other Chinese government bodies including the national securities regulator (CSRC), publicly banned ICO fundraising in China on September 4th: (CN announcement) (English) (Bloomberg) (Reuters)
  • SFC in Hong Kong announced its views on ICOs on September 5th: (Announcement)
  • The UK Financial Conduct Authority (FCA) announced that it was keeping a close eye on ICOs on September 6th: (FT)
  • The Securities Commission (SC) of Malaysia issued a press release cautioning investors in ICOs on September 7th: (DNA)

About Richard Kastelein

Founder of industry publication Blockchain News, partner at ICO services collective CryptoAsset Design Group (helped raise over $200m+), director of education company Blockchain Partners (Oracle Partner) and ICO event organiser at leading industry event  CryptoFinancing (first ICO event in Europe) - Richard Kastelein is an award-winning publisher, innovation executive and entrepreneur. He sits on the advisory boards of half a dozen Blockchain startups and has written over 1200 articles on Blockchain technology and startups at Blockchain News and has also published pioneering articles on ICOs in Harvard Business Review and Venturebeat.
 
Kastelein has spoken (keynotes & panels) on Blockchain technology in Amsterdam, Antwerp, Barcelona, Beijing, Brussels, Bucharest, Dubai, Eindhoven, Gdansk, Groningen, the Hague, Helsinki, London, Manchester, Minsk, Nairobi, Nanchang, San Mateo, Shanghai,Tel Aviv and Venice. His network is global and extensive.
 
He is a Canadian (Dutch/Irish/English/Métis) whose writing career has ranged from the Canadian Native Press (Arctic) to the Caribbean & Europe. He's written occasionally for Harvard Business Review, Wired, Venturebeat, The Guardian and Virgin.com and his work and ideas have been translated into Dutch, Greek, Polish, German and French.
 
A journalist by trade, an entrepreneur and adventurer at heart, Kastelein's professional career has ranged from political publishing to TV technology, boatbuilding to judging startups, skippering yachts to marketing and more as he's travelled for nearly 30 years as a Canadian expatriate living around the world.
 
In his 20s, he sailed around the world on small yachts and wrote a series of travel articles called, "The Hitchhiker's Guide to the Seas' travelling by hitching rides on yachts (1989) in major travel and yachting publications. He currently lives in Groningen, Netherlands where he's raising three teenage daughters with his wife and sailing partner, Wieke Beenen.

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