Sweden’s financial regulators have issued a statement detailing the risks related with ICO investments. The warning was released by the country’s Financial Supervisory Authority (FSA) on November 7th. In the release, FSA also provided clarity to the term ICO and explained it as a “term used as the designation for launching a new token or other form of digital access based on the crypto version.”
Most ICOs are not regulated and they lack proper supervision by authorities. The document highlights four major ICO-related risks.
- The system lacks consumer protections and investors are not given any rights.
- There is a lack of market valuation and there are no assurances that the digital asset is matched by a real market value.
- There is no requirement that the issuer buy back the digital asset. The lack of access to a secondary market makes it difficult to sell the digital asset after it is purchased.
- There is a high risk of investment fraud as ICOs are not required to provide basic information to investors before the launch.
On the other hand, the statement issued last month by New Zealand’s Financial Market Authority (FMA) regarding cryptocurrency services encouraged ICOs and the cryptocurrency industry. The FMA explains that, “it wants to facilitate responsible innovation, and ensure that the regulatory regime remains relevant and agile.” It also states that any startup looking to raise funds via an ICO is strongly encouraged to do so and should approach the FMA in their project’s early stages.
Furthermore, guidelines are discussed for any individual or a company planning to launch a cryptocurrency exchange, wallet providing firm, or a brokerage firm. FMA states that such a provider must be “be a member of a dispute resolution scheme, be on the Financial Services Providers Register, and must comply with fair dealing provisions in the Financial Markets Conduct Act.”
At the end of the statement, regulators warn public against scammers and the volatility in values of digital currencies. Some guidelines on “ways to invest” are also offered.