AFM: ICO is "Dangerous cocktail"

Netherlands Financial Markets Authority AFM reported on high risks associated with ICO
14 November

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

Chairman, AFM

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.

 

Japan’s FSA defines policy on cryptocurrencies and ICOs

The Japanese Financial Services Agency announced a document clarifying its financial administrative policies on cryptocurrencies and initial coin offering
20 November

FSA has recently published 41-page document on financial policy. There is the unit on Bitcoin and other cryptocurrencies.

First topic of discussion was providing protection of crypto-exchanges. As cryptocurrencies utilizing Blockchain technology, “which was not seen before,” agency claimed that both business and system management required.

The agency decided to “look at the trends in the currency market” and ensure that each operation took place at exchanges. FSA also pays its attention to the balance between the promotion of innovation and the protection of users, noted that it is necessary to monitor whether the system is in place, they will respond to changes in the environment surrounding the virtual currencies for protecting users, such as verifying appropriate explanation or information provision for users is in place.

FSA tries to provide high-level security to users “through safe and stable system operation and fraud prevention.” It will be provided by verifying whether risk management has already been installed at crypto-exchange.

The Agency also will struggle against such crime acts like money laundering.