The financial regulator of the United Arab Emirates, the Securities and Commodities Authority (SCA) has issued a warning of the risks of initial coin offerings (ICO), as well as on similar fundraising undertakings like initial token offerings, token presale, or token crowdsales.
In its circular, the SCA notes that the ICOs are highly speculative and highly volatile and most of them are not regulated, hence can be a fraud.
Similarly to many other regulators, who have warned, or outright banned ICOs (China and South Korea), the UAE regulator notes that many of those ICOs are issued abroad and tracking and recovering funds may be impossible, in case of a collapse of the offering of fraud. Additionally, there may be no liquidity on the secondary market of the tokens and many investors are unaware of the risks, costs and expected returns. The SCA also warns that often the information provided in the ICO white papers is incomplete, unaudited and misleading, by, for example emphasizing the potential benefits and not mentioning risks.
SCA also said that it “does not recognize, regulate, or supervise any ICO presently and that ICO investments are not offered legal or regulatory protection. It said that investors involved in ICO investments are doing so at their own risk.”
UAE’s SCA is yet another financial markets watchdog to warn of the risks of ICOs. Others that did so are Singapore’s MAS, the US SEC, ESMA, UK’s FCA, Germany’s BaFin, to name a few.