Dutch financial regulator warned investors on high risks of initial coin offering campaigns.
The Netherlands Authority for Financial Markets (AFM) – the country's equivalent to the U.S. Securities and Exchange Commission –released a statement today outlining the risks it sees in the market for new cryptocurrencies, including those issued through the crowdsale model.
Although the AFM sees the possibilities of blockchain technology for financial services, it points to the high risks of ICOs in the current hype. The high risk of scams and loss of intake combined with the hype around ICOs at the moment is a dangerous cocktail.
Merel van Vroonhoven
Also, the AFM listed main ICO risks:
- The anonymous and transboundary nature of blockchain technology makes it possible to use an improved scheme of the traditional pyramid, which is difficult to recognize.
- The promise of profitability is overstated, while ICO startups are projects at an early stage of development.
- Private investors do not have enough experience and knowledge to assess the investment attractiveness.
- ICO-projects do not provide exhaustive information for risk assessment.
- Many projects have speculative features and are subject to manipulation.
- They are an ideal way of laundering funds received illegally.