ICOs are a mix between "crowd-funding" and "crypto-currencies", allowing issuers to raise funds - in the form of actual crypt-currencies such as Bitcoins or Ether - digitally from the public using in exchange for tokens or vouchers which either concede a share in the issuer, a right to services from the issuer or, sometimes, apparently nothing at all. However, last month, BBVA reckoned the fever for ICOs in blockchain must be cooled as the industry is facing a "dangerous bubble" driven by speculation.
"ICOs are very high-risk, speculative investments", the United Kingdom watchdog explained. While stopping short of banning the practice of digital token sales, the FCA highlighted that ICOs are "very high-risk, speculative investments". "You should be conscious of the risks involved. and prepared to lose your entire stake". During an interview with Chinese television network CCTV-13, Bing explained that last week's "ban" isn't actually a ban at all - ICOs have simply been "paused" while the government hashes out the appropriate regulations. "It would be hard to verify the authenticity of the scheme and the recovery of foreign-invested monies may be subject to foreign laws or regulations".
Price volatility: Like cryptocurrencies in general, the value of a token may be extremely volatile - vulnerable to dramatic changes. An ICO white paper might be unbalanced, incomplete or misleading. In the United States, the Securities and Exchange Commission has called for ICOs to be regulated like any other securities market.
The statement also urges investors to "fully understand" the features and inner workings of a digital token sale.
The Financial Conduct Authority has become the latest to sound the alarm on fundraising in cryptocurrencies, warning investors there is a "good chance" they could losing everything in the unregulated market.
ICO trading has been most frenzied in Beijing and Shanghai, with 65 ICOs launched during the year, raising about £300m from 105,000 investors, according to the state-run news agency Xinhua.
In its statement, the FCA said some ICOs could fall under regulatory oversight.
If you suspect that an ICO is a scam, the FCA wants people to report it to them.
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