UK’s top financial watchdog the Federal Conduct Authority (FCA) has released a cautionary statement regarding Initial Coin Offerings. Initial Coin Offerings (ICOs) are initial crowdfunding campaigns for new cryptocurrency that may or may not have some physical presence behind it. The move follows the global trend of clamping down on the ICOs and cryptocurrencies in general.
The UK’s FCA warning was nevertheless very subdued compared to the crackdown against ICOs in China, South Korea and USA moving to bring them under the Securities and Exchange Commission, top US financial watchdog. The warning by FCA was more of a caution to potential investors about the huge risks associated with the ICO funding and how their entire investment can be lost as a result because there is no mechanism in place to check their investment.
“ICOs are very high-risk, speculative investments,” according to the FCA. Funny, they failed to mention that most of the exchange markets are indeed speculation-based because they are “legal” exchanges coming under the writ of the government.
There are more than 1000 coins available in the market right now and almost all of them have entered the market using ICO or any other crowdfunding approach. Some of them have tasted success while an overwhelming majority of them are still languishing in the shadows.
So, it is not an entirely negative move from the FCA as educating the people regarding ICOs is very important. The reason is that people are always in the mood for quick profits and returns on their investments. Many ICOs promise hefty returns as part of their speculative numbers. So, people tend to buy that and invest some money in the new programs.
The bad news is that all that glitters is not gold. Many ICOs are now facing increased problems in their execution and most of the times, their tech or startup is not ready to be deployed. These are the aspects you need to consider before investing in ICOs, no matter how small your investment is.
ICOs are not regulated by the FCA or any other financial authority-yet. Maybe it’s a move to gradually bring them under government control rather than drastic measures being taken elsewhere. People in tech and government here realize that blockchain and cryptocurrency are the future but we do need them to save them from getting destroyed from within. We know how inflated speculation can kill entire industries. So, it seems that the UK right now is understanding the proceedings and is no rush to sort out the whole cryptocurrency marketplace and investments.