The Board of the International Organization of Securities Commissions (“IOSCO”) warned investors last week about its concerns related to Initial Coin Offerings (“ICOs”). The IOSCO is a leading international policy forum for securities regulators, and its Board is comprised of 34 securities regulators from around the world.
The IOSCO noted that some purchasers of ICO digital tokens appear to be engaging in highly speculative investments. These investments typically involve the sale of digital tokens created using distributed ledger technology. The sales are sometimes marketed as a capital raise to fund the development of a digital platform or other projects and the tokens may be used to access the platform or otherwise participate in the development of the project. Because these sales are not standardized, depending on the facts and circumstances of each offering, the tokens may or may not be considered securities by the applicable regulators.
The IOSCO pointed to significant investor protection concerns, such as fraud, because ICOs are increasingly targeted toward retail investors through online channels by parties outside of the investors’ home jurisdiction.
This statement by the IOSCO reflects an ever broadening concern by securities regulators around the world about the use of blockchain token sales to attract speculative investments. Anyone doing an ICO at this point should expect the ICO to be reviewed by multiple securities regulators with an eye toward identifying regulatory violations.
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