FCA warns ICO investors risk losing everything
(ShareCast News) - Britain's financial watchdog warned consumers they should be prepared to lose all the money they might invest in so-called Initial Coin Offerings.
In a consumer warning issued on Tuesday, and just over a week after China had declared them outright illegal, the Financial Conduct Authority labelled ICOs as "very high-risk, speculative investments".
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.
One ought only to invest in an ICO if they are an "experienced investor, confident in the quality of the ICO project itself (e.g. business plan, technology, people involved) and prepared to lose [their] entire stake," the FCA said.
Even then, potential investors were assuming multiple risks, the FCA said, including the alck of regulation, no investor protection, price volatility and the potential for fraud to name but just a few.
The warning followed a ban on ICOs from Beijing on 4 September and according to some reports was set to be followed by a blanket prohibition against domestic trading platforms in the country that use Bitcoin or other digital currencies.
On 2 September, Bitcoin prices had hit the $5,000 mark, versus the barely $624 which they cost just one year ago.
According to Coindesk, as of 1538 BST Bitcoins were trading 1.18% higher to $4,238.36.