Japanese financial regulator, the Financial Services Agency (FSA), has issued a statement warning investors of the risks associated with initial coin offerings (ICOs).
In the statement released Oct. 27, the FSA stressed the "high" risk factors of digital tokens issued as a way of raising funds from for investors. The regulator aired several concerns over the blockchain use case including price volatility, with the FSA saying "The price of a token may decline or become worthless suddenly."
Further, the agency emphasized the potential for fraud in the nascent industry. "There are possibilities that the projects in the paper are not implemented, or the goods and services planned are not offered in reality," the document states.
The regulator warns:
"You should have a deal at your own risk only after understanding enough the risks ... and the content of an ICO project if you buy a token."
The statement also stresses that projects launching token sales that ICOs are regulated and may fall "within the scope of the Payment Services Act and/or the Financial Instruments and Exchange Act" depending on the structure of the scheme. As a result, ICO holders are bound to comply with certain rules and regulations under those acts.
The news follows other recent ICO warnings from countries including the U.S., Singapore and Canada, among others. In September, South Korea and China went so far as to issue outright bans on ICOs, labelling them, in China's case, as "illegal and disruptive to economic and financial stability."
Japan FSA image via Shutterstock