A new document issued by the UAE Securities and Commodities Authority (SCA) on Sunday, Feb. 4 warns investors about the risks of Initial Coin Offerings (ICOs).
In the document, the SCA emphasizes that investors involved in ICO fundraising campaigns have to assume all associated risks, given that digital token-based fundraising activities are not regulated by the UAE, and no legal protection can be provided in cases of fraud.
The major risks, as pointed out by the SCA, include high volatility of ICO tokens on secondary markets, misleading or unaudited details in ICO offerings, as well as common unawareness of potential costs and gains shared by most retail investors.
Moreover, the SCA mentioned the risks of investing in foreign ICOs, commenting that it may be difficult to verify the proper regulatory compliance of such fundraisers and track the invested money as it leaves the UAE.
This is the second time that the country’s government warns its citizens about the risks of ICOs as back in Oct. 2017, Abu Dhabi's Financial Services Regulatory Authority (FSRA) issued its guidelines on both ICOs and cryptocurrencies.