6 Main ICO Risks

The financial regulator of Singapore named 6 main risks that must be taken into account when taking part in the Initial Coin Offering (ICO)

Earlier, the Central Bank of Singapore clearly indicated position on the issue of tokens.

Afterwords, the main risks that investors must take into account when participating in the ICO, were published in a special document of the Monetary Authority of Singapore.

The Monetary Authority of Singapore (MAS) defines a digital token as a cryptographically protected representation of the owner of the token's right to exercise a specific function or to obtain benefits.

Digital tokens have several types, one of which is virtual currency, and their functions are much wider than the typical cryptocurrency.
Investors who decided to participate in the ICO, must know about the following risks:

1.Online / foreign - operators

Investments in financial schemes that operate outside the territorial limits of Singapore or online, have a high degree of risk due to fraud. If the scheme is closed outside Singapore,it will be very difficult to verify and track the operator.

2.Sellers without well known reputation

Often in start-ups, sellers of digital tokens are persons without proven work experience, which often negatively affects the success of enterprises.

3. Insufficient liquidity of the after market

Once trading digital tokens in the after market, there is a risk of a lack of a sufficient number of active sellers and buyers, and there is a risk of high difference between the rates of the buyer and the seller.
The platform or exchange where trading is performed by digital tokens may not be subject to the regulation of the Singapore Monetary Authority

4. Highly Speculative Investments

The cost (determining the cost) of a digital token is often extremely speculative. In the actual absence of ownership rights on the assets of the seller, the digital token (tokens) is not supported by any material values.
Such a token is an extremely speculative investment and the price of such a token can vary greatly within a short period of time. The risk lies in the high probability of losing of all investments and in the absence of the token value.

5. Investments that promise high profits

Investment schemes using digital tokens that promise high profits are often associated with high risks. Due to high referral commissions, high profits can be generated, which means a significant increase in operating expenses and a decrease in the chances of earning the promised profit.

6. Money Laundering and the Financing of Terrorism

Investments in digital tokens, due to the anonymity of transactions and the speed of transactions,are attractive to persons who engaged in illegal activities.
If law enforcement bodies decide to start an investigation, it is likely that this will affect investors negatively.

In connection with the above risks, investors need to understand the product well and make efforts to search for information about assets, business and product itself.
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