European Securities and Markets Authority (ESMA) issues warning on the high risk of Initial Coin Offerings (ICO)
European Securities and Markets Authority (ESMA) issued two documents, one for firms involved in ICO, and another for investors, warning them on many risks related to the Initial Coin Offerings. Initial Coin Offerings is a way of money raising from the public through coins, or virtual currency tokens. In the warning for investors ESMA stated the lack of regulation around the ICO products, and emphasize the risk of losing all funds invested. ESMA also warned on extreme price volatility, inadequate informations of products that would be developed, and the possibility of technology flaws since distributed ledger technology (blockchain) is still largely untested.
ESMA also reminds firms involved in ICOs of their obligations under EU regulation in particular to ‘The Markets in Financial Instruments Directive’ (MiFID), ‘The Alternative Investment Fund Managers Directive (AIFMD)’ and ‘The Fourth Anti Money Laundering Directive’ which requires firms to have in place appropriate record keeping, and have an obligation to report any suspicious activity. You can find ESMA alert to investors and firms involved in Initial Coin Offerings bellow: