ESMA: You Could Lose Your Investments in ICOs

January 16, 2018

ESMA: You Could Lose Your Investments in ICOs

Participation in ICOs could lead to the loss of investments, warns the chair of the European Securities and Markets Authority (ESMA).

Despite the fact that initial coin offerings are somewhat similar to the process of the initial public offering (IPO), there are some serious differences between them: ICO participants do not receive a share in the company, and the regulation is nearly nonexistent, which makes investors almost unprotected. This is what troubles Steven Maijoor, the chair of the European Securities and Markets Authority.

He told CNBC:

"You don't have the regular protection that regulated investments offer, and can lose all of your investments. As a European securities market authority, we have warned, in November, about the so-called ICOs because while ICOs in principle can give you services in return for the coin that you buy, or a share in the revenue, this happens in a very unregulated space."

Because of these related to ICOs issues, governments of major Asian countries became vigilant and some of them even banned it. For example, China and South Korea have already prohibited ICOs, and Japan is mulling the possibility of implementing same measures. 

However, such serious steps are mainly taken by Asian countries, although European ones have a more democratic attitude towards ICOs. Maijoor says that the role of the ESMA as a financial regulator is to provide all European countries with relevant information that will help them to better prepare for cryptocurrency developments.

He said:

"It is hard for me to generalize the attitude towards cryptocurrency across Europe and Asia because the regulations, rules and intervention need to be based on local situations and circumstances. Cryptocurrency has different developments across the world <...> our role as regulators is to exchange information to help each other prepare for these developments."

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