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Data recently published by France’s AMF (Autorite des Marches Financiers) concerning the ICO market has confirmed that a huge 2,261 enquiries about crypto-assets during the first 10 months of 2018, signalling a significant increase in cases related to fraud.
The French regulator mentions concerns regarding crypto fraud but confirms that just 6% of tokens are linked to financial instruments. Instead, the majority of cases relating to the enquiries revolve around fraudulent investments in cryptocurrencies rather than ICOs (initial coin offerings).
A Small Market But A Big Concern
ICOs are still a fairly minor form of financing and the French market has generated just EUR 89 million (or the global EUR 19.4 billion, via 15 ICOs since 2014. The AMF suggests that despite the fact that some hedge fund investors have started to use ICOs, most traditional institutions continue to look elsewhere, meaning that the number of investments in tokens will remain relatively small for the time being.
However, this is a growing market, as is underlined by the fact that crypto-asset advertising has jumped from under 3% of ads related to the investment products market to over 12% in the space of one year. Unsurprisingly, this has encouraged more and more investors to join.
Throughout the period of January to September, just under one in four investment ads displayed in France were advertisements for Contract for Difference (CFDs), signalling a major decline since the 2016 stats where the figure was essentially double. The Sapin II Law additionally bans digital advertising for high-risk investments such as CFDs, which again can be attributed as one of the reasons for the changing marketplace.
While crypto-assets and ICOs do present wonderful possibilities, there is no question that they come with risks. The absence of price transparency is a major issue while the vulnerability to potential cyber attacks cannot be ignored either. This is why the large number of enquiries made cannot be seen as a surprise. However, the authorities are taking action.
France’s AMF Already Fighting The Problem
After receiving an average of 7.5 enquiries every day throughout the first 10 months of 2018, France’s AMF has been forced to take action regarding the threats posed by fraudulent crypto-asset investments.
France’s regulator has now published a list of fraudulent cryptocurrency platforms that investors should steer clear of. The blacklist contains 74 platforms in which fraudulent activities and high risks are suspected. Those dangers can come from the platform itself or due to poor security regulations that allow third-party fraudsters to take advantage. The AMF plans to add to the list as a result of its continued research into the field, including the direct upshots of handling the enquiries.
The increased presence of the regulator should deter some fraudsters while also helping investors actively take greater responsibility for their actions. Still, with the cryptocurrency industry still in its relative infancy, the dangers will remain. The AMF anticipates a lot more enquiries from investors old and new over the coming weeks and long into 2019 and beyond.