Log in
Forgot password ?
Become a member for free
Sign up
Sign up
New member
Sign up for FREE
New customer
Discover our services
Dynamic quotes 

MarketScreener Homepage  >  News  >  Economy & Forex

News : Latest News
Latest NewsCompaniesMarketsEconomy & ForexCommoditiesInterest RatesBusiness LeadersFinance Pro.CalendarSectors 
All NewsEconomyCurrencies & ForexEconomic EventsCryptocurrenciesCybersecurityPress Releases

UK watchdog crypto-fundraising warning welcomed by industry

09/12/2017 | 01:14pm EST
Logo of Bitcoin is seen on an advertisement of an electronic shop in Tokyo

LONDON (Reuters) - Start-ups aiming to raise funds through the issuance of new digital currencies, via so-called initial coin offerings (ICOs), welcomed on Tuesday a warning on the "very high risk" of such investments from Britain's financial watchdog.

The Financial Conduct Authority (FCA) warned consumers that they must be conscious of risks involved in ICOs and should research each specific project before investing in it.

"ICOs are very high-risk, speculative investments," the FCA said in a written warning that fell short of last week's outright ban on such fundraising by China. "There is a good chance of losing your whole stake."

ICOs are a digital form of raising funds from the public using a virtual currency, with issuers accepting bitcoin or ether in exchange for a proprietary coin or token that is related to a specific company or project and can then - in theory - be traded like other cryptocurrencies.

They have provided the fuel for a rapid ascent in the value of cryptocurrencies this year that has driven worries that a crypto-bubble could be set to burst.

By creating and issuing digital tokens, entrepreneurs can raise large sums quickly - sometimes hundreds of millions of dollars in minutes - with little or no regulatory oversight. But unlike conventional fundraising, token holders are generally not given any share in the particular project, nor any security.

Moneymailme, a social payments app, told Reuters on Tuesday that it was going to issue an ICO in October, with an initial goal of $20 million. Until now, the company has managed to raise just $3 million, through conventional fundraising methods.

Part of the reason for raising funds via an ICO - rather than via other means - is that it is an easier, faster way to raise money, said Mihai Ivascu, Moneymailme's founder. But he welcomed the FCA's warning.

"I think it’s very good that warnings like this are in the market," he said. "We should all be willing to help authorities in creating a regulatory framework (for ICOs)."


Last week China banned ICOs, saying it was necessary to stop illegal fundraising and pyramid schemes, news that briefly sent the value of most cryptocurrencies tumbling.

There appeared to be no negative impact on cryptocurrencies from the FCA warning on Tuesday, with both bitcoin and ether trading slightly higher on the day.

The U.S. Securities and Exchange Commission also issued an "investor alert" in July to make investors aware of potential risks from ICOs. And in August, regulators in Singapore and Canada also cautioned investors about the sector.

For the buyer, the main reason for buying these highly risky tokens is often simply a speculative bet that their value will rise - a bet that has often paid off handsomely in recent months.

The FCA said the digital token issued may represent a share in a firm, a prepayment voucher for future services or in some cases offer no discernible value at all.

"Typically ICO projects are in a very early stage of development and their business models are experimental," it said.

Most ICOs are not regulated by the FCA and many are based overseas and might not intend to use the funds raised in the way set out in marketing brochures, the watchdog said

Jakob Drzazga, co-founder of Berlin-based firm Brickblock, which is building a blockchain-based marketplace, said such warnings were important in protecting consumers. Brickblock is aiming to raise $50 million in an ICO in October.

"(This warning) gives guidance to really research the team that's behind these ICOs and do your due diligence, which I think is really important," he said.

(Reporting by Huw Jones and Jemima Kelly; Additional reporting by Helen Reid; Editing by Mark Potter and Gareth Jones)

By Huw Jones and Jemima Kelly

© Reuters 2017
Stocks mentioned in the article
ChangeLast1st jan.
AIMING INC. -1.73% 454 End-of-day quote.8.61%
BITCOIN - EURO -6.81% 24945.15 Real-time Quote.12.92%
BITCOIN - UNITED STATES DOLLAR -7.40% 30161.425 Real-time Quote.12.01%
TEAM, INC. 0.09% 11.45 Delayed Quote.5.05%
Latest news "Economy & Forex"
09:25aBitcoin Trust Completes CAD$230 Million Initial Public Offering
09:21aJPMorgan to join British online banking chase within months
09:10aDirectDefense Launches New Enterprise Security Program Review Offering to Address Overlooked Cyber Risks
09:10aDemand for U.S. Durable Goods Eased in December
09:09aBoeing to delay 777X again as it posts record annual loss
09:09aImperial Brands to focus on top five cigarette markets in turnaround plan
09:06aBiden to target drilling, fossil fuel subsidies in new climate orders
09:06aOKCoin Becomes First Major Exchange to Support Blockchain Domain Names
09:03aWall Street set to open lower with earnings underway, eyes on Fed
09:02aChina vice premier says difficulties in SOE reform still need to be resolved
Latest news "Economy & Forex"