Japanese financial observers warn of ICO risks

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In a statement released on October 27, the FSA stressed the high risk factors of digital tokens issued as a way of raising funds for investors. The regulator raised several concerns about the use of the blockchain, including price volatility. In addition, the agency stressed the potential for fraud in the nascent industry.

The statement also emphasizes that projects launching the sale of tokens that control ICOs may "fall under the law of the Payment Services Act and/or the Financial Instruments and Exchanges Act" depending on the structure of the scheme. As a result, ICO owners are required to comply with certain rules and regulations in accordance with those acts.

The news follows other recent ICO warnings from countries, including the United States, Singapore and Canada, among others. In September, South Korea and China went so far as to issue direct bans on ICOs, noting them in the case of China as "illegal and destructive for economic and financial stability."