PUBLIC WARNING STATEMENT ON INITIAL COIN OFFERINGS (ICO)
Securities and Commodities Authority (SCA) UAE would like to caution investors regarding digital token based fundraising activities / investment schemes in UAE, which may be referred to as “initial coin offerings", “initial token offerings", “token pre-sale", “token crowd-sale" (collectively referred to as ICO schemes hereon).
ICOs involve issuance of digital tokens created using distributed ledger technology and sold to investors by action or through subscription, in return for cryptocurrency. The terms and features of ICOs differ in each case, as does the nature of the rights or interest (if any) that is acquired by the investor. The ICOs are highly speculative and are characterised high volatility in the prices of tokens.
Investors should be aware of the following risks associated with investment in ICOs':
- Some of the ICOs are not regulated and may be subject to risk of fraud.
- The ICO may not be operating within UAE and be subject to foreign laws and regulations which can not only be difficult to verify. Further following the money in the event of a collapse of the ICO as well as recovering invested funds may prove extremely difficult in practice.
- ICO trading in secondary markets may be subject to opaque and volatile pricing and insufficient liquidity.
- Many investors especially retail may not be able to understand the risks, costs and expected returns, arising from their investment in ICO.
- The information made available to investors can be unaudited, possibly incomplete and may present the investment case in an unbalanced and misleading manner (e.g. by emphasizing the potential benefits while overlooking risks).
SCA at present, does not regulate or mandate or recognise any ICO. No legal protection is currently offered and investors are entering into these investments at their own risk.
Furthermore, all issuers of digital tokens, intermediaries facilitating or advising on an offer of digital tokens, and platforms facilitating trading in digital tokens should therefore seek independent legal advice to ensure they comply with all applicable laws, and consult SCA where appropriate.
Furthermore, SCA has recently formed a Fintech team, to facilitate the implementation of financial technology initiatives and to follow-up with recent developments in this field, which can be contacted on the following email address: firstname.lastname@example.org to answer any related inquiries.