UK’s Financial Conduct Authority Issues Consumer Warning on ICOs

Countries around the world have been contemplating how to best handle cryptocurrency ICOs and token sales in general. In most cases, these tokens are considered securities, subject to regulatory scrutiny. The United Kingdom is one of the countries actively keeping close tabs on these projects. Its Financial Conduct Authority (FCA) recently issued a warning on initial coin offerings, although there is no indication of impending 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 announce somewhat similar stances. Although there is only one country taking an active approach in this matter, it is not unlikely we would see similar measures in other nations moving forward. Whereas China is leading the way with rather harsh action, the UK is taking a more cautious approach for now.

Britain’s FCA recently issued a public warning regarding initial coin offerings.  These kinds of warnings have been issued for Bitcoin and other cryptocurrencies in the past. However, this warning clearly states that people should only invest in an ICO if they are experienced investors, and that they need to be “confident in the quality of the initial coin offering project.” The latter point is pretty interesting, given that there is very little reason to immediately trust an ICO in the first place.

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

Things are still in a state of flux for ICO regulation in the United Kingdom. The FCA notes that 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 regulation in the UK which could benefit ICOs in the long run. There is a high level of regulatory cover and governance in the country. This would make it 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 remains to be seen. Some countries will be more open to this business model than others, and the UK is one of the friendlier places for the time being.

All of this goes to show there is a lot more to a cryptocurrency ICO than creating the tokens themselves. While that is an important aspect of this business model as a whole, 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 some are doing exactly that. It will be interesting to see how this situation evolves in the United Kingdom and elsewhere.