UAE watchdog issues cryptocurrency warning

The United Arab Emirates’ financial regulator has warned investors about the risks of cryptocurrency and initial coin offerings (ICOs) following a volatile few weeks for cryptocurrencies.

A circular issued by the Securities and Commodities Authority (SCA) on February 4 highlighted the risks of participating in an ICO or any other token-based means of fundraising. In particular, the SCA lists the dangers of unaudited or misleading ICOs and the highly volatile price fluctuations as key risks.

In addition, the fact that ICOs are currently unregulated by the SCA means that investors have no legal protection in the event of fraud. The circular also warns about investing in ICOs issued abroad because they are subject to foreign laws and regulations that can be difficult to verify and “recovering funds in case of ICO collapse may prove to be extremely difficult in practice”.

The SCA is just one of a number of global regulators to have issued warnings to investors over crypto trading and ICOs. China banned the practice outright in 2017 while Japan’s financial regulator has ordered all crypto exchanges to submit a report on their risk management systems.

And the new head of the Bank of International Settlements, Agustin Carstens has argued that there is a “strong case for policy intervention” and that authorities “have a duty to educate and protect investors”.

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