Dutch financial regulator, the Netherlands Authority for Financial Markets (AFM) has warned investors about the risks in the market for new digital currencies, including those issued through initial coin offerings (ICO).
The regulator claimed that investors should be wary of the promises of high returns from ICOs, as well as the possibility of price manipulation in the token markets.
In his statement, AFM chairperson Merel van Vroonhoven said that there is great promise shown by Blockchain technology for financial services applications but there is also high risk of scams and loss of investments in ICOs.
“Although the AFM sees the possibilities of Blockchain technology for financial services, it points to the high risks of ICOs in the current hype. The high risk of scams and loss of intake combined with the hype around ICOs at the moment is a dangerous cocktail.”
In a follow-up statement, an AFM representative has called for tighter cooperation among regulators in Europe on the issue.
Van Vroonhoven adds:
“At this moment we have sent out this warning as have other supervisors in Europe. As ICO’s are international phenomena and reach out to consumers/investors cross border, it is important we cooperate with the other European regulators.”
A Dutch News report, however, has claimed that the AFM has no authority to regulate ICOs in Netherlands.
Other countries’ actions against ICOs
Due to growing concerns around ICOs, several financial regulators around the world have taken actions against ICOs. Regulators in countries like Canada, US, and Singapore have issued public warnings against the Blockchain funding model, while market watchdogs in China and South Korea have ordered ICO bans.
A major European Union regulator, the European Securities and Markets Authority (ESMA), meanwhile, has issued similar warnings against ICOs.