European Financial Regulator: ICO is at risk of fraud

   333

They set out what it perceives as the risks initial coin offerings (ICOs) pose for investors and startups, respectively.

Struck by a worried tone on the emerging market, ESMA warned investors that using custom cryptocurrencies to raise funds is associated with a "high risk" of capital loss. Adding to that, the authorities warned that ICOs could go beyond the laws and regulations of the EU, which in turn does not benefit investors.

The second statement by market observers emphasized that startups or open-source projects participated in ICOs at risk of running regulated investment activities, not complying with applicable EU legislation, including its emission prospectus directive, the fourth anti-money laundering directive and other laws.

Firms involved in ICOs should "carefully study" these events, as they were warned, because violation of EU rules would be considered a violation.

This news, in particular, follows other recent ICO warnings, including a statement by the Japanese FSA to investors about the risks of the ICO, and the other from the Federal Financial Supervisory Authority of Germany.