UK Watchdog Warns Bitcoin Investors Could Lose Their ‘Entire Stake’

The U.K.’s financial regulator has issued a warning to bitcoin traders over the frenzy created by initial coin offerings (ICO), some of which are being promoted by celebrities such as Paris Hilton and boxing champion Floyd Mayweather.

The Financial Conduct Authority (FCA) has said that traders investing in ICOs should be prepared to lose all of their money. Furthermore, they should be aware that some may end up being scams.

It said:

“ICOs vary widely in design. The digital token issued may represent a share in a firm, a prepayment voucher for future services or in some cases offer no discernible value at all. Often ICO projects are in a very early stage of development. ICOs are very high-risk, speculative investments.”

It added:

“You should be conscious of the risks involved and fully research the specific project if you are thinking about buying digital tokens. You should only invest in an ICO project if you are an experienced investor, confident in the quality of the ICO project itself and prepared to lose your entire stake.”

Following this was a list of the risks associated with ICOs. These included:

  • Unregulated space
  • No investor protection
  • Price volatility
  • Potential for fraud
  • Inadequate documentation
  • Early stage projects

It added that some ICOs may not use the money raised ‘in the way set out when the project was marketed.’

China Bans ICOs

The FCA’s comments come at a time when China recently outlawed ICOs in the Chinese nation. China has also said that it plans on banning the trading of digital currencies on domestic exchanges. At the beginning of September, the ban was backed by seven of China’s regulators. It is hoped this will stamp out fraudulent fundraisers.

According to a report, Beijing and Shanghai have seen an increase in ICO trading. So far, this year has seen the launch of 65 ICOs. This has raised around $400 million from 105,000 investors.

When someone invests in an ICO their money goes up when the coin’s value increases. To date, bitcoin has more than quadrupled during 2017. At the beginning of the year bitcoin was valued at $1,000. Yet, at the start of September it had risen to $5,000. As of the 13th September, bitcoin is trading at $3,902. It’s believed that China’s plans for digital currency exchanges is impacting the price of bitcoin.

Ethereum has also seen its value rise. At the beginning of the year it was trading around $8. Now, though, it’s valued at $260. As a result, traders are willing to speculate and put their money into ICOs. Of course, because of the market’s rise in value many ICOs are taking advantage and are simply scams to steal money.

China’s regulators believe that the issuance of token sales is illegal. As a result, they are keen to crackdown on fundraising activities in the country.

Following the ban, a statement from the regulators said:

“In essence, it is a kind of non-approved illegal open fund raising behavior, suspected of illegal sale tokens, illegal securities issuance and illegal fund-raising, financial fraud, pyramid schemes and other criminal activities.”

BitKan Freezes Trading Services

Since the ban, one Chinese over-the-counter (OTC) trading service for digital currencies has frozen its activities.

BitKan said in a post that it would be suspending trading on the 14th September at 12:00 a.m., Beijing time. This is due to increased pressure from authorities. However, it didn’t mention when it would resume services, if at all. The move from BitKan is interesting as OTC traders may be excluded from the ban. The ban, at the moment, only impacts exchange-based trading.

Celebrities Promote ICOs

The increase in ICO trading is partly down to celebrities promoting them. This, in turn, is causing a frenzy as new investors jump on board.

At the end of July, boxing champion Floyd Mayweather took to Instagram to promote an ICO. In the photo Mayweather predicted that he would make a lot of money in the ICO for Stox, a prediction market project, which launched at the beginning of August. In its token sale, Stox went on to raise $30 million.

At the end of August, Mayweather then promoted his second ICO on Twitter. This time it was for the token sale of the Hubii Network, which is developing a blockchain-based content marketplace. He also mentioned the hash tag #CryptoMediaGroup, but didn’t elaborate.

Celebrity heiress and reality TV star Paris Hilton is the latest celebrity to jump on the ICO band wagon. On the 4th September, it was reported that Hilton had announced her participation in a token sale.

Taking to Twitter, she said:

“Looking forward to participating in the new @LydianCoinLtd Token! #ThisIsNotAnAd #CryptoCurrency #BitCoin #ETH #BlockChain.”

Many, however, remain dubious as to nature of the ICO. One person tweeted:

Called Lydian, the project claims that it is ‘developing blockchain driven technologies to reduce ad fraud and to maximize the effectiveness of ad marketing expenditures.’

A PR for it said:

“It aims to address the trust and transparency issues affecting digital marketing platforms using blockchain distributed ledgers and industry exclusive data sets to democratize trust at scale.”

China’s Ban Shouldn’t Stop Firms Researching the Blockchain

This is according to the director general of the Chinese central bank’s research institute.

In a report, Sun Guofeng, from the People’s Bank of China (PBoC), said that the ICO ban was ‘necessary and timely.’

However, he added:

“This should not prevent relevant financial technology companies, industry bodies and other technology firms from continuing their research into blockchain technology.”

He added that the blockchain is a ‘good technology’ and that an ICO is not the only way to research it.

For many, this move from China will be considered further interference from authorities keen to curb the market. For others, however, it’s a step in the right direction.

Sasha Ivanov, CEO of blockchain company Waves, said:

“There’s no secret that a lot of the initial coin offerings, with ads on Facebook promising huge discounts and returns, are nothing but a scam.”

“The Chinese government could cope with those companies working in a shadow zone of the law, but they have finally lost patience, as more and more companies tried to raise millions for nothing.”

David Moskowitz, co-founder and CEO of blockchain-powered social network Indorse, said that it would help to protect consumers from fake ICOs.

“We hope the authorities will recognize the potential of the sector for economic growth and technological development, and enact rules which will allow for the safe and secure future of the industry.”

Featured image from Shutterstock.

Innovate UK Seeks Blockchain Pitches in £8 Million Startup Competition

A U.K. government agency is reaching out to blockchain startups in a competition that is focused on digital health solutions.

In a notice from Innovate UK, a nondepartmental public office that is designed to promote innovation through grants and investments, it is offering up to £8 million for U.K. businesses to work on innovation projects that tackle the biggest healthcare challenges.

The competition is being run through the digital health technology catalyst, which is part of the Industrial Strategy Challenge Fund. It’s designed to support the creation of digital health products that meet the requirements of the NHS. This is part of a new £35 million funding programme over four years.

According to Innovate UK, ‘digital health promises to have a profound impact on the approach, delivery and administration of healthcare, for the benefit of patients.’

In its notice, it said:

“The types of digital health projects we will fund include (but are not limited to) … emerging digital health technologies with a demonstrated healthcare benefit, such as artificial intelligence, machine learning, augmented reality, blockchain and the Internet of Things.”

The competition opens today (31st July) and runs until the 11th October at 12 p.m.; however, the deadline for registrations is the 4th October, 2017. Applicants will be notified on the 17th October.

It’s only open to U.K.-based firms and projects must start by the 1st February, 2018.

Innovate UK stipulate that feasibility projects must range in size from total project costs of £50,000 to £75,000 and need to be completed within one year.

Whereas industrial research and experimental development projects must range in size from total project costs of £500,000 to £1 million and need to be completed within three years.

According to the government agency,

“[Projects] must have the potential to achieve one or more of the following:

  • improve patient outcomes

  • transform healthcare delivery

  • enable more efficient delivery of healthcare.”

It adds:

“In this competition we won’t fund projects that:

  • don’t have digital technology as the project core

  • focus on developing medical devices (unless enabled using digital technology as a core component)

  • seek to discover or develop medicines

  • seek only to develop data or record-keeping systems.”

The aim of the competition is to speed up the development of innovative digital solutions that can be utilised for healthcare challenges, thus helping the sector to grow.

Funding Projects through Innovate UK

This isn’t the first time that Innovate UK has funded projects in the past.

In 2016, the government agency awarded £248,000 to a startup that was building a cross-border payments tool using the ethereum technology.

According to a report from CoinDesk, the money was awarded to London-based Tramonex where the money was reported to be used to further the development of its cross-border blockchain tool.

At the time, Tramonex co-founder and CEO Amine Berraoui said:

“We are quite advanced in our prototype already, it’s more about looking for different approaches to handle the technology. Then to develop the commercial clients.”

Once completed the prototype will be submitted to the U.K.’s Financial Conduct Authority (FCA) for approval.

Last September, Innovate UK launched a new blockchain project in a £15 million competition. In the government’s Emerging and Enabling Technologies Programme, Innovate UK were seeking to ‘identify and speed up’ technology by providing funds worth up to £15 million.

According to the competition description, it reads:

“Our aim is to inspire the new products, processes and services of tomorrow; those with the potential to unlock billions of pounds of value to industry and disrupt existing markets.”

The aim of this competition is to help businesses broaden out innovation activities, to find new sources of revenue from new products, processes or services.

Just through these competitions and projects it shows how important new technologies such as the blockchain is to Innovate UK and how much they want the country to harness its potentials.

Competitions Provide Boost to Innovative Solutions

There are several competitions taking place that are aiming to find the next big thing in the blockchain space.

In Hong Kong, a technology programme is hoping to unearth the next fintech blockbuster. In a report from the South China Morning Post, 10 technology startups have been selected for a 12-week mentorship programme that is backed by 18 major financial establishments.

These include companies from Hong Kong, South Korea, Singapore and the United States, who are aiming to implement innovation that could aid financial institutions within the Asia-Pacific.

Accenture’s FinTech Innovation Lab Asia-Pacific is who picked the 10 technology startups.

Evangelos Kotsovinos, the Asia head of infrastructure and China chief information officer for Morgan Stanley, said:

“Asia provides unique challenges and opportunities that are driving true fintech innovation here.”

“Working with labs such as Accenture’s is a great way for Morgan Stanley to identify technologies that can help us grow and evolve our business, but also to give back to the community by advising start-ups on how to commercialise their technology to meet the demands of a global financial services firm.”

According to the SCMP, some of the technology startups include Block, a South Korean blockchain infrastructure provider; CoverGo, a Hong Kong-based company that automates manual insurance processes; KapitalWise, a U.S. startup, that provides a micro-investment platform; and microUmbrella.com, which delivers a micro-insurance buying and claims platform.

Piyush Singh, Accenture’s senior managing director of financial services for Asia-Pacific, said:

“The financial institutions in the FinTech Innovation Lab Asia-Pacific select start-ups who are trying to address, in a practical manner, current real-world fintech challenges facing the industry.”

Now more than ever, financial firms need to maintain pace with the rate at which the technological world is developing. For it to ensure this, it must embrace fintech, but the only way for that to be achieved is for the finance sector to research new methods of doing things. To do so, means a more efficient system that is free from errors and cuts down on costs.

As the former CEO of Barclays once said, the financial services sector needs to open itself to fintech if it wishes to remain relevant.

Speaking at a Money 20/20 fintech conference in Copenhagen in June, Anthony Jenkins said:

“Banks can avoid [becoming irrelevant], but they have to act now, and what they really need to do is think about innovation, but also transformation, doing something radically different.”

Featured image from Shutterstock.