Dutch Regulator: ICO Environment Is a 'Dangerous Cocktail'

Regulators have issued a new warning to investors in the Netherlands about putting money into initial coin offerings (ICOs).

AccessTimeIconNov 13, 2017 at 4:45 p.m. UTC
Updated Sep 13, 2021 at 7:09 a.m. UTC

Regulators have issued a new warning to investors in the Netherlands about putting money into initial coin offerings (ICOs).

The Netherlands Authority for Financial Markets (AFM) – the country's equivalent to the U.S. Securities and Exchange Commission – published a statement today outlining the risks it sees in the market for new cryptocurrencies, including those issued through the blockchain funding model.

Merel van Vroonhoven, chairman of the AFM, said in a statement:

"Although the AFM sees the possibilities of blockchain 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."

The regulator went on to enumerate a number of possible concerns for investors, including a lack of transparency into some ICO organizers. AFM also warned investors to be wary of promises of high returns, as well as the risk of price manipulation in token markets that have low levels of trade velocity.

In a follow-up statement to CoinDesk, a representative for the agency called for greater cooperation among regulators on the issue.

"At this moment we have sent out this warning as have other supervisors in Europe. As ICO’s are international phenomena’s and reach out to consumers/investors cross border, it is important we cooperate with the other European regulators," the representative said.

The release is the latest from a national-level securities regulator, adding to the growing chorus of concern from agencies in countries like Canada, Singapore and the U.S. In some cases, as seen in China and South Korea, market watchdogs there have moved to prohibit use of the funding model entirely.

The European Securities and Markets Authority, one of the primary markets regulators for the European Union, issued similar warnings today. The AFM does not have the ability to regulate ICOs, according to Dutch News.

Approximately $3.3 billion has been raised through the ICO model to date, according to the CoinDesk ICO Tracker.

Editor's Note: Some of the statements in this report have been translated from Dutch.

Image via Flickr


Please note that our privacy policy, terms of use, cookies, and do not sell my personal information has been updated.

The leader in news and information on cryptocurrency, digital assets and the future of money, CoinDesk is a media outlet that strives for the highest journalistic standards and abides by a strict set of editorial policies. CoinDesk is an independent operating subsidiary of Digital Currency Group, which invests in cryptocurrencies and blockchain startups. As part of their compensation, certain CoinDesk employees, including editorial employees, may receive exposure to DCG equity in the form of stock appreciation rights, which vest over a multi-year period. CoinDesk journalists are not allowed to purchase stock outright in DCG.

Learn more about Consensus 2024, CoinDesk’s longest-running and most influential event that brings together all sides of crypto, blockchain and Web3. Head to consensus.coindesk.com to register and buy your pass now.