The United Arab Emirates’ financial watchdog has warned UAE residents about the risks associated with initial coin offerings.
The Securities and Commodities Authority (SCA) yesterday issued a statement, highlighted a number of risks associated with ICOs, including that these token sales “are not regulated and thus may be subject to fraud risks”.
"ICOs may be issued abroad, and therefore are subject to foreign laws and regulations that can be difficult to verify. Tracking and recovering funds in case of ICO collapse may prove to be extremely difficult in practice," the SCA said. “Many investors, especially retail, may not be able to comprehend the risks, costs, and expected returns arising from ICO investments,” the watchdog added.
The SCA’s warning is the latest example of regulators around the worlds increasing scrutiny or taking a tougher stance on ICOs. The controversial fund-raising method has been banned in China and South Korea, while other countries, such as the US and the UK have ramped up their efforts to monitor the sector.
The UK’s Financial Conduct Authority (FCA) in September issued a similar warning to consumers, highlighting a number of potential risks associated with ICOs, including the lack of regulation and protection for investors, the high price volatility associated with digital tokens and the potential for fraud. In December the watchdog announced that to perform a "deeper examination" of the funding model to determine whether a further regulatory action was needed.