The European Securities and Markets Authority (ESMA) today issued two separate statements that outline what it perceives as the risks initial coin offerings (ICOs) pose for investors and startups, respectively.
Striking a concerned tone on the nascent state of the market, ESMA warned investors that the use of custom cryptocurrencies for fundraising comes with a "high risk" of capital loss. Adding to that, the authority alerted that ICOs may fall outside of EU laws and regulations, which in turn does not benefit investors.
The markets watchdog's second statement stressed that startups or open-source projects involved in ICOs are at risk of conducting regulated investment activities without observing applicable EU legislation, including its prospectus directive, the fourth anti-money laundering directive and other laws.
Firms involved in ICOs should give "careful consideration" to these activities, it warned, as failure to comply with EU rules would be considered a breach.
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