CMA cautions public on pre-sale offers of digital coins

February 21, 2018
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In a statement, CMA says it has not licensed any initial coin offering adding that ongoing offerings are unregulated and speculative investments with considerable risk to the investor./FILE

,  NAIROBI, Kenya, Feb 21 – The Capital Market Authority has warned the general public against investing in digital tokens marketed as pre-sale offers before they are launched on public exchanges.

In a statement, CMA says it has not licensed any initial coin offering adding that ongoing offerings are unregulated and speculative investments with considerable risk to the investor.

Initial Coin Offering (ICO) involves the creation of digital tokens using distributed ledger technology and subsequent sale to investors.

Risks involved include a heightened potential for fraud where some issuers could seek to perpetrate fraud against investors and liquidity risks where the trade may give to opaque and volatile pricing.

“As the issuer may also be operating the initial coin offering (ICO) from outside the investor’s jurisdiction, following the money in the event of a collapse of ICO as well as recovering invested funds, may prove extremely difficult in practice.”

The statement comes at a time when there has been an increased interest in virtual currencies as an alternative investment option with several Kenyan entities floating ICOs.

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