The european securities and markets Authority (ESMA) has published yesterday, two separate declarations that define what it sees as the risk that the ICO pose, respectively, to investors and to startups. ESMA, based in Paris, observed a rapid growth of the ICO, not only in Europe but around the world. Thus it is concerned that investors are not aware of the “high risk” that they take when they invest in the ICO.
A high risk for investors and startups
Using worried to talk about the nascent state of the market, ESMA warned investors that the use of crypto-currencies for the collection of funds is accompanied by a “high-risk” of loss of capital. Adding to that, the authority was alerted to the fact that the ICO does not fall within the scope of the laws and regulations of the european Union. A situation that does not accrue to the investors. The second statement of this authority emphasizes that startups or open source projects involved in the ICO may conduct investment activities regulated without respecting the european legislation in force, including the fourth directive on money laundering.
A extreme price volatility that scares the ESMA
ESMA considers that the ICO does not offer enough options in terms of foreign exchange. “Investors may not be able to exchange their crypto-currencies against currencies-traditional, such as the Euro,” said ESMA. In addition, the european regulatory Authority deplores the extreme volatility of the value of crypto-currencies. And to add that a good number of stock markets dedicated to crypto-currencies are not regulated and are vulnerable to the manipulation of prices in the market and to the fraudulent activities.
It is important to note that these two declarations are the result of recent warnings in other countries about always the ICO. In particular, there is the statement of the FSA in Japan and that of the federal Authority for financial supervision in Germany.
Source : Coindesk