The talk of the town within the global regulatory space is still towards the surge in cryptocurrency fundraising, or initial coin offerings (ICO).
Today, the Dubai Financial Services Authority (DFSA) issued a warning about the potential risks, the latest regulator to crack down on the burgeoning cryptocurrency market. Dubai’s move follows similar warnings in the United States, Singapore and Canada, and more recently the the UK.
However, the announcement from the DFSA did not explicitly ban ICOs, only warned that some types of offerings should be regarded as high-risk investments. Those include offerings that are made on a cross-border basis: “They have their own unique risks, which may not be easy to identify or understand.”
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The warning comes a few days after China banned the practice of raising funds through ICOs, causing a plunge in the price of popular cryptocurrencies, including Bitcoin and Ethereum. Regulators such as the SEC and CSA have also moved to classify ICO/ITO tokens as securities in some cases.
ICO schemes typically raise funds through the issuance and sale of digital tokens. The DFSA is concerned that ICOs could be marketed to inexperienced investors who may seek exposure without carefully weighing the risks.
The regulator noted in its statement: “The DFSA wishes to highlight that these types of product offerings, and the systems and technology that support them, are complex. They have their own unique risks, which may not be easy to identify or understand; such risks may increase where offerings are made on a cross-border basis. These offerings should be regarded as high-risk investments.”
Finally, the watchdog reminded investors that they should take note that the DFSA “does not currently regulate these types of product offerings or license firms in the Dubai International Financial Centre (DIFC) to undertake such activities.”