Residents of the United Arab Emirates have received official warnings from the Gulf nation’s financial regulatory body, the Securities and Commodity Authority (SCA), about the dangers of investing in initial coin offerings (ICOs).
The SCA distributed a circular on February 4th warning UAE citizens of the risks of investing in token-based fundraising activities, including ICOs and token pre-sales. Among the risks mentioned in the circular were the unregulated nature of the ICO market, unverified and perhaps misleading claims made the ICO company, and volatility in token price after launch.
Emphasizing that it had yet to regulate this new burgeoning market, the SCA warned that legal protection or compensation may not be available to investors in case of fraud, especially in the case of investment into overseas ICO projects.
The SCA singled out investment into foreign ICO projects in the circular, warning that:
"ICOs may be issued abroad, and therefore are subject to foreign laws and regulations that can be difficult to verify. Tracking and recovering funds in case of ICO collapse may prove to be extremely difficult in practice."
The SCA is the latest financial trading regulator to get more involved in the cryptocurrency space. The Securities and Exchange Commission from the United States is recently completed a high-profile ICO bust when it seized assets raised in the ICO of Dallas-based AriseBank, which amounted to over $600 mln.