The Story:

The European Securities and Markets Authority (ESMA), has warned investors about newly issued cryptocurrency coins. Europe’s top markets regulator said that these were unregulated and experimental, and warned of pitfalls in investing in such online crowdfunding, particularly by startups.

An Initial Coin Offering, or ICO, is an unregulated method of raising funds for new cryptocurrency ventures. Rather than going through the highly regulated and rigorous process of raising capital through a bank or from venture capitalists, startups often use a crowdfunding process to raise money.

Important Because:

ICOs, have rapidly fueled the rise of most cryptocurrencies.

ICOs peaked at a record high of nearly $180 billion in early September, up from just $17 billion at the beginning of 2017.

This Was Said:

“ICOs are extremely risky and highly speculative investments,” the agency said, adding there was a risk of “the total loss of your investment”.

“Many of the coins or tokens … have no intrinsic value other than … to use them to access or use a service/product,” said the agency, warning coin issuers they may be subject to existing regulations. (as reported by Reuters)

 

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