ICO Investors Risk Losses Amid Potential Fraud, EU Watchdog Says
- ESMA warns investors they may lose funds as ICOs speculative
- Companies involved must observe MiFID, other EU regulations
A cross between crowdfunding and an initial public offering, ICOs are the sale of tokens based on the blockchain, the technology underlying bitcoin.
Photographer: Chris Ratcliffe/BloombergInvestors risk losing their money in so-called initial coin offerings because these deals are “extremely volatile” and vulnerable to fraud and money laundering, according to the European Securities and Markets Authority.
Investors could lack the protections of European Union laws if the deals fall outside of the scope of the 28-nation bloc’s legislation, ESMA said in a statement on Monday. Where ICOs qualify as financial instruments under EU law, firms could have to comply with the Markets in Financial Instruments Directive and rules for prospectuses, alternative investments and money laundering.