ESMA Joins Fellow Regulators in Warning Against ICOs
- The AFM of Holland also releases statement, advises investors to avoid buying tokens.

The European Securities and Markets Authority and the Autoriteit Financiële Markten, the financial regulators of the EU and Holland respectively, have issued statements on the subject of initial coin offerings.
The sudden popularity of this new fundraising phenomenon has led many national regulatory authorities to worry that investors may jump into an investment without understanding that they could lose everything.
EU
ESMA issued two statements, one meant for the investing public, and one for companies offering ICOs.
It also points out the fact that ICOs often operate outside of the law, because adequate laws have not yet been written to cover the myriad uses of the tokens that are being sold. This means that investors are not protected.
In addition to this, a fundraising technique which is both unsupervised and of proven effectiveness is naturally a very attractive proposition for scammers. The fact that this is all based on technology which is still developing and little understood, and which is at its root decentralised and anonymous, only serves to sweeten the deal.
Information regarding ICOs, presented in documents known as 'whitepapers', is often incomplete, unaudited, and even misleading. ESMA advises European citizens to be wary.
In tandem with this, firms that conduct ICOs are warned that the onus is upon them to ensure that their activities are compliant with relevant and existing legislation, where it applies.
ICOs may be new-fangled, but the firms presenting them are still bound to provide adequate information to investors, refrain from financing terrorists and laundering money, and check if their ICO falls under MiFID laws: "ESMA stresses that firms involved in ICOs should give careful consideration as to whether their activities constitute regulated activities. Any failure to comply with the applicable rules will constitute a breach."
Holland
The Dutch financial regulator has also advised investors not to invest in ICOs, for similar reasons to those listed by ESMA. AFM Chairman Merel van Vroonhoven said:
"Although the AFM sees the possibilities of Blockchain Blockchain Blockchain comprises a digital network of blocks with a comprehensive ledger of transactions made in a cryptocurrency such as Bitcoin or other altcoins.One of the signature features of blockchain is that it is maintained across more than one computer. The ledger can be public or private (permissioned.) In this sense, blockchain is immune to the manipulation of data making it not only open but verifiable. Because a blockchain is stored across a network of computers, it is very difficult to tamper with. The Evolution of BlockchainBlockchain was originally invented by an individual or group of people under the name of Satoshi Nakamoto in 2008. The purpose of blockchain was originally to serve as the public transaction ledger of Bitcoin, the world’s first cryptocurrency.In particular, bundles of transaction data, called “blocks”, are added to the ledger in a chronological fashion, forming a “chain.” These blocks include things like date, time, dollar amount, and (in some cases) the public addresses of the sender and the receiver.The computers responsible for upholding a blockchain network are called “nodes.” These nodes carry out the duties necessary to confirm the transactions and add them to the ledger. In exchange for their work, the nodes receive rewards in the form of crypto tokens.By storing data via a peer-to-peer network (P2P), blockchain controls for a wide range of risks that are traditionally inherent with data being held centrally.Of note, P2P blockchain networks lack centralized points of vulnerability. Consequently, hackers cannot exploit these networks via normalized means nor does the network possess a central failure point.In order to hack or alter a blockchain’s ledger, more than half of the nodes must be compromised. Looking ahead, blockchain technology is an area of extensive research across multiple industries, including financial services and payments, among others. Blockchain comprises a digital network of blocks with a comprehensive ledger of transactions made in a cryptocurrency such as Bitcoin or other altcoins.One of the signature features of blockchain is that it is maintained across more than one computer. The ledger can be public or private (permissioned.) In this sense, blockchain is immune to the manipulation of data making it not only open but verifiable. Because a blockchain is stored across a network of computers, it is very difficult to tamper with. The Evolution of BlockchainBlockchain was originally invented by an individual or group of people under the name of Satoshi Nakamoto in 2008. The purpose of blockchain was originally to serve as the public transaction ledger of Bitcoin, the world’s first cryptocurrency.In particular, bundles of transaction data, called “blocks”, are added to the ledger in a chronological fashion, forming a “chain.” These blocks include things like date, time, dollar amount, and (in some cases) the public addresses of the sender and the receiver.The computers responsible for upholding a blockchain network are called “nodes.” These nodes carry out the duties necessary to confirm the transactions and add them to the ledger. In exchange for their work, the nodes receive rewards in the form of crypto tokens.By storing data via a peer-to-peer network (P2P), blockchain controls for a wide range of risks that are traditionally inherent with data being held centrally.Of note, P2P blockchain networks lack centralized points of vulnerability. Consequently, hackers cannot exploit these networks via normalized means nor does the network possess a central failure point.In order to hack or alter a blockchain’s ledger, more than half of the nodes must be compromised. Looking ahead, blockchain technology is an area of extensive research across multiple industries, including financial services and payments, among others. Read this Term technology for financial services, it points to the high risks of ICOs in the current hype. The high risk of scams and loss of intake combined with the hype around ICOs at the moment is a dangerous cocktail. In the media, more and more messages are coming about consumers who invest in ICOs with money intended for later or even heavily borrowed money. Abroad, several examples of fraudulent ICOs are already known, and the AFM is seriously concerned about the risk of misleading investors in the Netherlands. We therefore advise consumers not to invest in ICOs under current circumstances. "
The European Securities and Markets Authority and the Autoriteit Financiële Markten, the financial regulators of the EU and Holland respectively, have issued statements on the subject of initial coin offerings.
The sudden popularity of this new fundraising phenomenon has led many national regulatory authorities to worry that investors may jump into an investment without understanding that they could lose everything.
EU
ESMA issued two statements, one meant for the investing public, and one for companies offering ICOs.
It also points out the fact that ICOs often operate outside of the law, because adequate laws have not yet been written to cover the myriad uses of the tokens that are being sold. This means that investors are not protected.
In addition to this, a fundraising technique which is both unsupervised and of proven effectiveness is naturally a very attractive proposition for scammers. The fact that this is all based on technology which is still developing and little understood, and which is at its root decentralised and anonymous, only serves to sweeten the deal.
Information regarding ICOs, presented in documents known as 'whitepapers', is often incomplete, unaudited, and even misleading. ESMA advises European citizens to be wary.
In tandem with this, firms that conduct ICOs are warned that the onus is upon them to ensure that their activities are compliant with relevant and existing legislation, where it applies.
ICOs may be new-fangled, but the firms presenting them are still bound to provide adequate information to investors, refrain from financing terrorists and laundering money, and check if their ICO falls under MiFID laws: "ESMA stresses that firms involved in ICOs should give careful consideration as to whether their activities constitute regulated activities. Any failure to comply with the applicable rules will constitute a breach."
Holland
The Dutch financial regulator has also advised investors not to invest in ICOs, for similar reasons to those listed by ESMA. AFM Chairman Merel van Vroonhoven said:
"Although the AFM sees the possibilities of Blockchain Blockchain Blockchain comprises a digital network of blocks with a comprehensive ledger of transactions made in a cryptocurrency such as Bitcoin or other altcoins.One of the signature features of blockchain is that it is maintained across more than one computer. The ledger can be public or private (permissioned.) In this sense, blockchain is immune to the manipulation of data making it not only open but verifiable. Because a blockchain is stored across a network of computers, it is very difficult to tamper with. The Evolution of BlockchainBlockchain was originally invented by an individual or group of people under the name of Satoshi Nakamoto in 2008. The purpose of blockchain was originally to serve as the public transaction ledger of Bitcoin, the world’s first cryptocurrency.In particular, bundles of transaction data, called “blocks”, are added to the ledger in a chronological fashion, forming a “chain.” These blocks include things like date, time, dollar amount, and (in some cases) the public addresses of the sender and the receiver.The computers responsible for upholding a blockchain network are called “nodes.” These nodes carry out the duties necessary to confirm the transactions and add them to the ledger. In exchange for their work, the nodes receive rewards in the form of crypto tokens.By storing data via a peer-to-peer network (P2P), blockchain controls for a wide range of risks that are traditionally inherent with data being held centrally.Of note, P2P blockchain networks lack centralized points of vulnerability. Consequently, hackers cannot exploit these networks via normalized means nor does the network possess a central failure point.In order to hack or alter a blockchain’s ledger, more than half of the nodes must be compromised. Looking ahead, blockchain technology is an area of extensive research across multiple industries, including financial services and payments, among others. Blockchain comprises a digital network of blocks with a comprehensive ledger of transactions made in a cryptocurrency such as Bitcoin or other altcoins.One of the signature features of blockchain is that it is maintained across more than one computer. The ledger can be public or private (permissioned.) In this sense, blockchain is immune to the manipulation of data making it not only open but verifiable. Because a blockchain is stored across a network of computers, it is very difficult to tamper with. The Evolution of BlockchainBlockchain was originally invented by an individual or group of people under the name of Satoshi Nakamoto in 2008. The purpose of blockchain was originally to serve as the public transaction ledger of Bitcoin, the world’s first cryptocurrency.In particular, bundles of transaction data, called “blocks”, are added to the ledger in a chronological fashion, forming a “chain.” These blocks include things like date, time, dollar amount, and (in some cases) the public addresses of the sender and the receiver.The computers responsible for upholding a blockchain network are called “nodes.” These nodes carry out the duties necessary to confirm the transactions and add them to the ledger. In exchange for their work, the nodes receive rewards in the form of crypto tokens.By storing data via a peer-to-peer network (P2P), blockchain controls for a wide range of risks that are traditionally inherent with data being held centrally.Of note, P2P blockchain networks lack centralized points of vulnerability. Consequently, hackers cannot exploit these networks via normalized means nor does the network possess a central failure point.In order to hack or alter a blockchain’s ledger, more than half of the nodes must be compromised. Looking ahead, blockchain technology is an area of extensive research across multiple industries, including financial services and payments, among others. Read this Term technology for financial services, it points to the high risks of ICOs in the current hype. The high risk of scams and loss of intake combined with the hype around ICOs at the moment is a dangerous cocktail. In the media, more and more messages are coming about consumers who invest in ICOs with money intended for later or even heavily borrowed money. Abroad, several examples of fraudulent ICOs are already known, and the AFM is seriously concerned about the risk of misleading investors in the Netherlands. We therefore advise consumers not to invest in ICOs under current circumstances. "