The Cayman Islands Monetary Authority (CIMA) has released a public advisory on virtual currencies noting the potential risks of making investments in initial coin offerings.
Piers Dryden, a Cayman Partner and founding member of Ogier's Digital, Blockchain and Fintech team, said that the advice issued by CIMA follows the path trodden by other regulators and is focused on cautioning the public of the risks of investing in ICOs.
The advisory, which is available here, identifies specific risks of investing in ICOs and highlights some red flags for customers in relation to prospective investment. It does not set out CIMA's interpretation or guidance on substantive legal issues and does not undermine the position of the Cayman Islands as the jurisdiction of choice for domiciling properly-advised ICOs.
Piers said: "We recommend that prospective ICO sponsors and token-issuers pay attention to areas of concern raised by CIMA and ensure their disclosure materials do not trigger the red flags CIMA has identified. Whilst CIMA's guidance is similar to that issued by other regulators in other jurisdictions, it is instructive of the areas on which CIMA is most concerned, and of which our team has been advising clients to-date."
The advisory recommends that customers thoroughly research prospective investments and avoid ICOs that fail to adequately disclose the terms of investment, details of the project and identity and background of the development as well as overly aggressive marketing strategies. Any ICO that purports to be endorsed by CIMA should also be avoided.