ESMA notifies investors that although ICO provides an opportunity to get an alternative income, it is rather risky tool for investing. ESMA grounds this statement with the fact there haven't been accepted all the laws that could help with the regulation of ICO and cryptos. Here is a brief list of reasons to be cautious about ICO:
- Lack of regulations;
- High volatility of tokens;
- High risk of losing investments;
- Lack of transparency, it is complicated to examine the information company provides.
ESMA also addresses ICO founders and notifies them that although there is a lack of regulation when it comes to ICO, they should still comply with the requirements applicable for the business and fundraising in EU. Particularly, projects that launch ICO should consider:
- EU Prospectus Directive - ICO founders must provide true and precise information on project goals and status;
- Markets in Financial Instruments Directive - projects that raise funds must follow common regulations enacted for EU financial markets;
- Alternative Investment Fund Managers Directive - companies that launch ICO must fully comply classification of alternative investment funds;
- Anti-Money Laundering and Counter Terrorist Financing Directive (IV edition).
In the third document which explains ESMA's attitude to ICO, it is recognized that ICO is an innovative way of fundraising. ESMA also provides its own token classification and discloses its tasks for ICO regulation:
- Risk assessment for investors, markets and financial stability;
- Making a single document regulating financial markets in EU;
- Providing monitoring of specific companies activity.
Now it is important to understand the way these documents will affect crypto industry in EU.