January 18, 2018

IOSCO issued a communication on concerns related to the Initial Coin Offerings (ICOs). In its meeting during October 18–19, 2017, the IOSCO Board discussed the growing usage of ICOs to raise capital as an area of concern. Following this meeting, IOSCO issued a statement to its members on the risks of ICOs, also referencing various approaches to ICOs taken by members and other regulatory bodies. IOSCO has also made available a sample of communications issued by authorities in several jurisdictions. Additionally, the IOSCO Board has established an ICO Consultation Network, through which members can discuss their experiences and bring their concerns, including any cross-border issues, to the attention of fellow regulators.

ICOs, also known as token sales or coin sales, typically involve the creation of digital tokens—using distributed ledger technology—and their sale to investors by auction or through subscription, in return for a crypto-currency such as Bitcoin or Ether. The IOSCO Communication states that these offerings are not standardized and their legal and regulatory status is likely to depend on the circumstances of the individual ICO. There are clear risks associated with these offerings. ICOs are highly speculative investments in which investors are putting their entire invested capital at risk. There have also been instances of fraud and investors are reminded to be very careful in deciding whether to invest in ICOs.  

 

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Keywords: International, Securities, Initial Coin Offerings, Risk, IOSCO

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