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The financial authorities of the Netherlands noted that Initial Coin Offerings are surrounded by extreme rush and call investors to be vigilant, although they acknowledge that regulation of this market is not their responsibility if tokens are not classified as securities.

“Although the AFM sees the possibilities of the blockchain technology to be used in financial services, it points high risks of ICOs amidst the current hype. The high risk of scams and investment loss combined with the hype around ICOs currently is a dangerous cocktail,” says Merel van Vroonhoven, chairman of the AFM.

The statement of the Dutch Financial Markets Authority (AFM) lists the main risks associated with ICOs. These risks are anonymity and cross-border character of blockchain technology, which allow building an advanced form of traditional Ponzi scheme. Furthermore, AFM mentions overestimated returns, the early phase of development of ICO projects, lack of necessary experience and the knowledge of private investors, lack of comprehensive information on projects and their teams that leads to inadequate risk assessment.

Moreover, many of ICO projects do not use tokens anywhere except in exchange trading, and therefore these assets have speculative features and are subject to manipulation.

AFM also recalls the fact that cryptocurrencies are often involved in money laundering.

“The issue of digital tokens in order to fund start-ups is currently vulnerable to deception, scams, and manipulation. The current hype surrounding cryptocurrencies and ICOs can make investors blind to see associated risks. As a result of these risks, investors face a very high risk of losing all their investments. In order to prevent these risks, the AFM currently recommends consumers not to invest in ICOs.”