ESMA: "ICOs are very risky"

The European Securities and Markets Authority (ESMA) issued two Statements on Initial Coin Offerings (ICOs)
13 November

The European Securities Market Authority (ESMA) issued an official statement, that warn investors of the extremely risky and speculative nature of the ICO. This is reported by Bloomberg.

In particular, the statement of the financial regulator says that this type of investment is fraught with a complete loss of the invested capital.

ESMA is alerting investors of the high risk of losing all of their invested capital as ICOs are very risky and highly speculative investments. The price of the coin or token is typically extremely volatile and investors may not be able to redeem them for a prolonged period. Another key risk stems from the fact that, depending on how they are structured, ICOs may fall outside of the scope of EU laws and regulations, in which case investors cannot benefit from the protection that these laws and regulations provide. ICOs are also vulnerable to the risk of fraud or money laundering.
 

The ESMA Statement

In addition, the ESMA published a guide for companies implementing the ICO, which states that in many cases they need to ensure compliance with the requirements of EU financial regulation related to providing potential investors with full information about the placement and countering money laundering.

Note that the European regulator first published an official statement on the ICO, despite the fact that other national regulators have repeatedly warned investors about the dangers associated with the initial placement of coins. So, earlier financial regulators of Germany and Great Britain called the ICO "a speculative form of investment."

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.