A top European regulator has said that buying into initial coin offerings (ICOs) can potentially lead to the total loss of an investment.
ICOs are similar to initial public offerings for a stock on the stock market; however, as a stock holder, you usually have a stake in the company, but in ICOs, it really varies in terms of acquired rights.
“You don’t have the regular protection that regulated investments offer, and can lose all of your investments,” Steven Maijoor, the chair of the European Securities and Markets Authority said Tuesday.
“As a European securities market authority, we have warned, in November, about the so-called ICOs because while ICOs in principle can give you services in return for the coin that you buy, or a share in the revenue, this happens in a very unregulated space.”
Maijoor had also indicated that while government action has so far only been taken in Asia, the role of the European Securities & Markets Authority as a regulator is to provide information across countries to better prepare for cryptocurrency developments in the future.