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UK’s Financial Conduct Authority Issues Consumer warning on ICOs


TheMerkle UK FCA ICO Warning

Different countries around the world are contemplating how they should handle cryptocurrency ICOs and token sales in general. In most cases,  these tokens are labeled as a security, which is subject to regulatory scrutiny. The United Kingdom is one of the countries actively keeping close tabs on these projects. The FCA recently issued a warning on initial coin offerings, although there is no indication of official regulation whatsoever.

UK’s FCA Warns About Cryptocurrency ICOs

More governments are warning the public about the dangers associated with initial coin offerings these days. Ever since the SEC made its intentions clear, other governments have been rather quick to utter somewhat similar statements. Although there is only one country taking an active approach regarding this matter, it is not unlikely we will see similar measures in different regions moving forward. China is leading the way with rather a harsh action, whereas the UK is taking a more cautious approach for now.

The Financial Conduct Authority – or FCA – recently issued a public warning regarding initial coin offerings.  These kinds of warnings were issued for Bitcoin and other cryptocurrencies as well in the past. However, the warning clearly state show people should only invest in an ICO if they are an experienced investor. Users need to be “confident in the quality of the initial coin offering project.” That latter part is pretty interesting, given there is very little reason to immediately trust ICOs in the first place.

This warning also serves as a clear indication of how people who invest in such token sales need to fully prepared to launch all of the money they invest. There is a very real chance a lot of these ICO projects will eventually collapse. When that happens, there will be no recourse or legal action to undertake for people living in the United Kingdom. That is, assuming no new regulation will be introduced in the future, which remains somewhat unclear at this point in time.

Things are still in a state of flux for ICO regulation in the United Kingdom. The FCA notes how most of these initial coin offerings are not regulated and lack investor protections. Most ICOs will eventually fall outside of the regulated space, but that does not mean they do not constitute securities or engage in certain activities subject to regulation. This does hint at how eventual ICO regulation in the UK may be rather “light”, although it is a bit early to tell for sure.

There are certain positive aspects of UK regulation which can benefit ICOs in the long run. There is a high level of regulatory cover and governance in the country. This makes it fa more straightforward to provide an ethical and correct approach to token usage and activities related to said tokens. Whether or not more ICO projects will pursue this option, remain to be seen. Some regions will be more “open” to this business model than others, and the UK is one of them for the time being.

All of this goes to show there is a lot more to a cryptocurrency ICO than just writing the tokens itself. While that is an important aspect of this entire business model, there are also moral and ethical features to take into account. Project teams should never try to cut regulatory corners. Although that may not be the primary objective for any of these token sales, it does appear they are doing exactly that. It will be interesting to see how this situation evolves in the United Kingdom and other regions.


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