The UK’s Financial Conduct Authority (FCA) has issued a warning on the risk of initial coin offerings (ICOs), asking consumers to fully research before investing in digital tokens.
In its warning, FCA termed ICOs as “very high-risk, speculative investments” and said that most of them are outside its regulatory oversight and hence without UK investor protections.
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The watchdog said ICO projects are in early development phase and a token’s value is extremely volatile. As a result, investors may risk losing their entire stake.
Moreover, ICOs offer inadequate documentation that can be incomplete or misleading and therefore requires technical understanding to gauge the risks, FCA added.
Hinting at ICOs’ potential for fraud, FCA said that some issuers might not use the funds raised in the same way as promised.
“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,” the watchdog said.
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By GlobalDataThe warning by FCA is the latest in a line of similar warnings issued by other regulators across the globe including the US Securities and Exchange Commission, Securities and Futures Commission of Hong Kong, South Korea Financial Services Commission.
Earlier this month, ICOs were termed illegal by the People’s Bank of China and ordered an immediate ban on related fundraising activities.
