Soaring popularity of ICOs put regulators across the globe on high alert. The newest addition to the ICO warning list is New Zealand and Sweden ICO Risk Warning.
9 November, AtoZForex – The financial regulators of Sweden and New Zealand have issued warning statements related to the risks of initial coin offerings (ICOs).
Sweden ICO risk warning
According to Swedish Financial Supervisory Authority (FSA) statement, the watchdog has outlined that a number of risks pertaining to ICOs. However, the regulator also compares ICOs to “grassroots” financing activities.
“The purpose of an ICO is to raise funding from the public to develop a business idea for a completed business, not different from grassroots financing,” says FSA.
The FSA warning urges investors to concern five key factors mentioned below:
1. No Rights
The FSA states that most ICOs are unregulated and do not fall under the supervision of authorities. As a result, there is a lack of consumer protections. This means investors may lose a huge amount of money.
2. No Market Valuation
Moreover, the FSA states that a new digital asset price is not required to match with a real market value. In addition, the ICO issuer cannot permit any independent parties to evaluate the token.
3. No Guaranteed Access to Secondary Market
The FSA warns that ICO issuers will not buy back the distributed token. The is no requirement that someone will also purchase the digital asset from the investor. Therefore, complications may exist while selling the tokens.
4. No Information Requirements
The FSA also noted that it is not mandatory for ICOs to provide all essential information to all investors at the same time.
5. Risk of Investment Fraud
Finally, the FSA warns that the increasing popularity of ICOs can attract fraudulent parties. This means they might initiate ICOs for money with no interest in completing any project.
New Zealand ICO risk warning
Similarly, in a related statement by New Zealand’s Financial Markets Authority (FMA), it also warned investors over the risk of ICOs. The regulator urged them to investigate the regulatory framework of ICO entities before doing any investment.
The FMA has also strongly encouraged investors to inform them if any businesses offering via ICO. The FMA also has released information guides for individuals. It stressed that businesses which are offering digital asset services must be on the Financial Services Providers Register. They must comply with fair dealing provisions of the Financial Markets Conduct Act.
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