FCA has its say on ICOs

The UK regulator has issued a reference guide on the legality of cryptocurrency fundraising.

The UK’s Financial Conduct Authority has become the latest regulator to say initial coin offerings will fall within regulatory boundaries on a “case-by-case” basis.

The FCA said that whether an ICO is regulated will depend on whether they are structured in a similar way to traditional financings such as initial public offerings, private placements of securities, collective investment schemes or crowdfunding.

The FCA highlighted six risks associated with ICOs including scant regulation in the UK, investments lacking cover in the investment protection schemes, cryptocurrency market correction risks , risk of fraudulent activity, no requirement for a prospectus and lack of a track record.

Similar regulatory guidance has also emerged from authorities in Canada, China, South Korea, the US and Singapore in recent months.

Cryptocurrency has not taken off among private equity managers , but firms are beginning to explore the space.

US-based Swarm Fund is raising a cryptocurrency fund to invest in US distressed real estate, US solar energy market products, software service companies, the mortgage lending market and high-value artwork.

In August, Finles Capital Management announced it was raising €100 million for a €500 million private equity fund by issuing its own cryptocurrency, FundCoin.