ARTICLE
24 November 2017

CySEC Announcement Regarding The Risks Of Investing In Initial Coin Offerings

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Elias Neocleous & Co LLC

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Elias Neocleous & Co LLC is the largest law firm in Cyprus and a leading firm in the South-East Mediterranean region, with a network of offices across Cyprus (Limassol, Nicosia, Paphos), Belgium (Brussels), Czech Republic (Prague), Romania (Budapest) and Ukraine (Kiev). A dynamic team of lawyers and legal experts deliver strategic legal solutions to clients operating in key industries across Europe, Asia, the Middle East, India, USA, South America, and China. The firm is renowned for its expertise and jurisdictional knowledge across a broad spectrum of practice areas, spanning all major transactional and market disciplines, while also managing the largest and most challenging cross-border assignments. It is a premier practice of choice for leading Cypriot banks and financial institutions, preeminent foreign commercial and development banks, multinational corporations, global technology firms, international law firms, private equity funds, credit agencies, and asset managers.
Further to its advice issued in October 2017 regarding investment in virtual currencies and related products the Cyprus Securities and Exchange Commission ("CySEC")...
Cyprus Corporate/Commercial Law

Further to its advice issued in October 2017 regarding investment in virtual currencies and related products the Cyprus Securities and Exchange Commission ("CySEC") has issued a further announcement drawing attention to statements issued by the European Securities and Markets Authority on 13 November 2017 on the risks of investing in Initial Coin Offerings ("ICOs"), addressed respectively to potential investors in ICOs and to investment firms involved in ICOs.

The statement for investors highlights the significant risks involved in investing in ICOs, including vulnerability to fraud or illicit activities, due to the fact that ICOs might not fall within the scope of regulation, the high risk of losing all of the invested capital, the limited exit options and extreme price volatility, inadequacy of information and flaws in the technological infrastructure underlying cryptocurrencies.

The statement for firms points out that, depending on how they are structured, ICOs may fall within the scope of the existing EU legislation and that firms involved in ICOs should carefully consider whether their activities constitute regulated activities, in which case they will need to comply with all the relevant legislation, including the Prospectus Directive, the Markets in Financial Instruments Directive, the Alternative Investment Fund Managers Directive and the Anti-Money Laundering Directive.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

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