What has happened?

The International Organisation of Securities Commissions (IOSCO) has warned of the risks associated with initial coin offerings (ICOs), citing investor protection concerns.

What does this mean?

IOSCO, the worldwide association of national securities regulatory commissions, has issued a notice cautioning investors against the "clear risks" associated with ICOs.

Echoing numerous similar warnings from global regulators, the organisation has warned that ICOs are "highly speculative investments" in which investors are putting their entire capital at risk.

ICOs are not standardised and their legal and regulatory status is also likely to depend on individual circumstances.

"The increased targeting of ICOs to retail investors through online distribution channels by parties often located outside an investor’s home jurisdiction - which may not be subject to regulation or may be operating illegally in violation of existing laws - raises investor protection concerns," the notice said.

The IOSCO therefore warned investors to be "very careful" when contemplating investing in ICOs.

Commenting on the notice, Hogan Lovells Technology partner John Salmon said: "The warning by the IOSCO shows how hot a topic ICOs have become for international regulators and that they are taking the issue very seriously."

"What would be welcome now is a movement to have a standardised approach towards regulation, as this would give market participants much-needed certainty," he added.

This warning by the IOSCO complements a growing list of similar warnings by financial regulators worldwide.

By the organisation's own count, 27 global regulators have so far have issued notes of caution on ICOs.

The IOSCO is the leading international policy forum for securities regulators, including the US Securities Commission, the Financial Conduct Authority and the European Securities and Markets Authority, and sets global standards for securities regulation.

Based in Madrid, it regulates more than 95% of the world's securities markets in more than 115 jurisdictions.


Receive free news and analysis – written by Hogan Lovells' world-leading legal teams and tailored to your preferences –  by registering on Engage. You can also access our cutting-edge interactive Lawtech tools, designed to help you make better decisions and save time and money.

You can also keep track of all the Engage content by following our LinkedIn page.