UAE Regulator Issues Warning on Initial Coin Offerings

The last couple of months have been filled with regulatory efforts, meant to reduce the risks associated with Initial Coin Offerings. The United Arab Emirates represents the last country to issue a warning against ICO investments.

With this in mind, recent reports indicate that the UAE Securities and Commodities Authority issued a written warning against crowdfunding activities using tokens, alongside with a few other crypto-related investment schemes. The SCA mentioned that ICOs, token offerings, crowdsale and presale activities are both highly speculative, but also highly volatile in terms of their prices.

The outlined risks also include difficulty in tracking the invested funds once they have been sent, potential money laundering activities, volatile pricings, inability to recover funds in case an ICO fails, lacking liquidity for the assets, fluctuating return of investments, incomplete information being given to investors and more.

The SCA also stated that: “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 (…) 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.” 

With this in mind, the regulatory agency is basically letting those interested in ICOs that it cannot guarantee the safety of their funds, at this moment in time. This is similar to what is happening in other countries, which have not yet regulated ICOs.

However, the SCA also decided to set up a fintech team that will work on researching the latest developments in the market, and facilitate the implementation of future innovative fintech initiatives.

Based on everything that has been outlined so far, the UAE SCA is continuing the trend of warning people against these type of investments. However, by practicing good etiquette when investing, and thoroughly researching companies prior to acquiring tokens, Initial Coin Offerings can turn into extremely profitable sources of revenue. Nonetheless, risks remain fairly high.