Lack of specific regulations
– There are no specific regulations governing ICOs as a whole. Although some ICOs are regulated by the AMF, most originate abroad and are not regulated.
Early stage projects
– ICOs are typically used to finance projects that are in the very early stages of development and are based on experimental business models. The risk of losing all the capital invested is high.
Inadequate documentation
– The documentation provided may be biased, incomplete or misleading. Expert technical knowledge is generally required to properly understand the investment.
Price volatility
– The price of a token, like that of most cryptocurrencies, can be extremely volatile.
Limited usability
– Some tokens can only be used on a specific platform or for certain products or services. If the project fails, you might not be able to convert or cash out the tokens, which will essentially become useless.
Potential for fraud
– Due to their very nature, ICOs are fertile ground for fraud. Some issuers might use the funds raised for purposes other than those specified in the project presentation.
Vulnerable platforms
– Despite the lines of defence offered by new technologies, transaction platforms are not immune to bugs and hackers.