New digital cryptocurrency coins that some start-ups use as a form of investment fundraising are vulnerable to deception, fraud, and manipulation, the Dutch financial markets authority AFM cautioned. Investors in the Netherlands were formally warned by the authority, as well as the Dutch central bank, that they should avoid Initial Coin Offerings, or ICOs, as they are not unreliable.
“Banks and other financial entities involved in the offer of ICO’s or the handling of tokens run the risk to see themselves involved in manipulation, money laundering, terrorism financing and other fraudulent practices,” the Dutch central bank DNB said.
With the ICOs (initial coin offerings) companies offer different types of digital coins that will grant you access to product or a service that is not yet out on the market, or a share in the future profits. Unlike shares or obligations these coins are not under the supervision of the AFM. The authority warns that many company that using this kind of financing lack of experience and often overestimate their profits.
The value of Bitcoin, the most famous cryptocurrency, has swung wildly in past months. While two weeks ago it was still on the border of the 7,000 dollar mark, it’s value has decreased since the announcement that the forking of the Bitcoin will be delayed.