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UAE’s securities regulator warns against ICOs

UAE’s Securities and Commodities Authority (SCA) has issued a warning against digital, token-based fundraising activities and investment schemes.

The regulator said that token-based fundraising drives, also called initial coin offerings (ICOs), initial token offerings, token presale, or token crowdsale are “are highly speculative and highly volatile in terms of prices.”

The SCA said that digital tokens are sold to investors in ICOs in exchange for cryptocurrencies, adding that ICO terms and features are case-specific and so is the nature of rights and interests acquired by investors (if any).

To that end, it listed a number of risks associated with ICO investments, including fraud risks, difficulty in tracking and recovering funds in case of ICO collapse, volatile pricing and insufficient liquidity with regard to ICO trading on the secondary market, lack of full understanding among investors on the risks, costs, and expected returns arising from ICO investments, and incomplete information provided to investors, among others.

“SCA reiterated 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,” it said. “SCA called upon digital token issuers, intermediaries advising on or facilitating digital token offerings, and digital token trading platforms to seek legal and regulatory advice to ensure compliance with all the applicable laws and regulations.”

SCA has set up a fintech team assigned with facilitating the implementation of fintech initiatives and keeping up with the latest fintech developments.

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