"Very high risk" and speculative was how the Britain's Financial Conduct Authority (FCA) described initial coin offerings (ICOs), the practice of creating and selling digital currencies to finance start-up projects, and warned customers against this trend.
With issuers accepting Bitcoin or Ether in exchange for a proprietary coin or token that is related to a specific company or project, ICOs are a digital form of raising funds from the public using a virtual currency.
"ICOs are very high-risk, speculative investments," the FCA said in a consumer warning.
"You should be conscious of the risks involved and fully research the specific project if you are thinking about buying digital tokens."
Saying it was necessary to stop illegal fundraising and pyramid schemes, news thath sent bitcoing tumbling, China has banned ICOs.
A share in a firm, a prepayment voucher for future services or in some cases offer no discernible value at all may be represented by the digital token issued, the FCA said.
"Often, ICO projects are in a very early stage of development," it said.
the watchdog said that many ICOs might not intend to use the funds raised in the way set out in marketing brochures, and most ICOs are not regulated by the FCA and many are based overseas.
"Each promoter needs to consider whether their activities amount to regulated activities under the relevant law," it said.
"In addition, digital currency exchanges that facilitate the exchange of certain tokens should consider if they need to be authorized by the FCA to be able to deliver their services."
Earlier in the year, warnings about the potential internet coin offering scams and "pump and dump" schemes by public companies was issued by the U.S. Securities and Exchange Commission.
Risks of investing in public companies that deliberately "pump" the prices of their offerings with "new and emerging technologies" and promote ICOs were central to the warning intended ot alert investors.
"Fraudsters often try to use the lure of new and emerging technologies to convince potential victims to invest their money in scams. These frauds include 'pump-and-dump' and market manipulation schemes involving publicly traded companies that claim to provide exposure to these new technologies," the SEC said in the warning.
A crack down on the burgeoning cryptocurrency market saw this as being the latest in the SEC's effort. Signals that securities laws may apply to the sale of new digital coins had been earlier also issued by the SEC.
As a measure more recently, due to questions about their ICOs, trading activities of four OTC-based companies were suspended by the SEC. before announcing their trading suspensions, each company's "accuracy" of information or "value" of assets was questioned by the SEC.
Warnings on the risks of cryptocurrencies and ICOs have also been issued by Russia's central bank.
In addition to cryptocurrencies themselves within Russia, the rising media profile of both ICOs – through which blockchain-based cryptographic tokens are sold in a crowdsale was respondents to by the Bank of Russia, according to a notice.
The statement noted the "high risks" of exchanging cryptocurrencies, as well as participation in ICOs (described as "a form of attracting citizens' investments").
China has also banned the ICOs as it attempted to more tightly control the ecosystem of exchanges offering access to those token sales.
(Sources:www.cnbc.com & www.coindesk.com)
With issuers accepting Bitcoin or Ether in exchange for a proprietary coin or token that is related to a specific company or project, ICOs are a digital form of raising funds from the public using a virtual currency.
"ICOs are very high-risk, speculative investments," the FCA said in a consumer warning.
"You should be conscious of the risks involved and fully research the specific project if you are thinking about buying digital tokens."
Saying it was necessary to stop illegal fundraising and pyramid schemes, news thath sent bitcoing tumbling, China has banned ICOs.
A share in a firm, a prepayment voucher for future services or in some cases offer no discernible value at all may be represented by the digital token issued, the FCA said.
"Often, ICO projects are in a very early stage of development," it said.
the watchdog said that many ICOs might not intend to use the funds raised in the way set out in marketing brochures, and most ICOs are not regulated by the FCA and many are based overseas.
"Each promoter needs to consider whether their activities amount to regulated activities under the relevant law," it said.
"In addition, digital currency exchanges that facilitate the exchange of certain tokens should consider if they need to be authorized by the FCA to be able to deliver their services."
Earlier in the year, warnings about the potential internet coin offering scams and "pump and dump" schemes by public companies was issued by the U.S. Securities and Exchange Commission.
Risks of investing in public companies that deliberately "pump" the prices of their offerings with "new and emerging technologies" and promote ICOs were central to the warning intended ot alert investors.
"Fraudsters often try to use the lure of new and emerging technologies to convince potential victims to invest their money in scams. These frauds include 'pump-and-dump' and market manipulation schemes involving publicly traded companies that claim to provide exposure to these new technologies," the SEC said in the warning.
A crack down on the burgeoning cryptocurrency market saw this as being the latest in the SEC's effort. Signals that securities laws may apply to the sale of new digital coins had been earlier also issued by the SEC.
As a measure more recently, due to questions about their ICOs, trading activities of four OTC-based companies were suspended by the SEC. before announcing their trading suspensions, each company's "accuracy" of information or "value" of assets was questioned by the SEC.
Warnings on the risks of cryptocurrencies and ICOs have also been issued by Russia's central bank.
In addition to cryptocurrencies themselves within Russia, the rising media profile of both ICOs – through which blockchain-based cryptographic tokens are sold in a crowdsale was respondents to by the Bank of Russia, according to a notice.
The statement noted the "high risks" of exchanging cryptocurrencies, as well as participation in ICOs (described as "a form of attracting citizens' investments").
China has also banned the ICOs as it attempted to more tightly control the ecosystem of exchanges offering access to those token sales.
(Sources:www.cnbc.com & www.coindesk.com)
