UAE’s Securities Authority Pushes For ICO Regulation
According to Forbes, the UAE’s regulatory authority for commodities and security, SCA, announced a ruling declaring ICOs as legal securities. The authority’s statement noted that due to increased expansion of the cryptocurrency market, in addition to general consensus by many governing authorities worldwide, the SCA officially approved regulation of ICOs and are hereby legally recognized as securities within the UAE.
This year, the nation's regulators issued a warning to all investors that Initial Coin Offerings lacked modes of protection as their main concern with the fundraising activity. Such points were further explained noting issues such as unaudited ICO details being among the biggest risk factor. Without proper security, details provided to investors may not be fully complete, unbalanced, or even attempt to mislead potential investors by minimizing focus on risk factors purposefully.
Regulation Structure Remains Undetermined
However, despite these core issues, the SCA have yet to state further details regarding the manner in which they will regulate or structure ICOs that specifically offer utility tokens. For many regulators globally, particularly that of the US regulatory organization known as the SEC, utility tokens are not considered securities. If the UAE choses to follow in the SEC’s footsteps regarding such matters, it can be expected that ICOs will no longer offer public sales but rather target accredited investors only.
ICO Funds Double In 2018
The recent announcement is possibly a response to the major increase in capital raised by startups this year. Compared to what ICOs collectively raised in 2017, this year has resulted in double, reaching above the $8 billion mark by only the second quarter. Despite this major spike, only about 50% of projects achieve their objectives.
Although the opportunity to invest in emerging digital tokens may appear enticing for buys new to the industry, the possibility of tokens being burned runs a higher risk factor in comparison to more traditional markets. These risk factors are the major driving force behind regulators worldwide have stressed the need to implement standardization throughout the rapidly growing market.