Thursday, December 24, 2020 / 07.47AM / By IOSCO /Header Image Credit: currency.com

The Board of the International Organization of Securities Commissions onDecember 22, 2020 published a report that seeks to helpregulators inform retail investors about the risks and characteristics ofcrypto-assets.

Crypto-assets carry risks that retail investors maynot fully understand, increasing the chance of losses on investments in theseassets. The IOSCO report titled InvestorEducation on Crypto-Assets identifies anarray of possible risks to investors, including such things as lack of marketliquidity, volatility, partial or total loss of the invested amount, insufficientinformation disclosure and fraud. 

The report describes methods that regulators can use to provideeducational material to retail investors on therisks of investing in crypto-assets and offers four areas of guidance coveringthe following activities:

• Developing educational content about crypto-assets;
• Informing the public about unlicensed or fraudulentfirms;
• Using a variety of communication channels to informinvestors; and
• Forming partnerships to develop and disseminateeducational materials.

In recent years, IOSCO members have expressedconcerns about the use of crypto-assets in areas ranging from trading, custody,clearing and settlement, accounting, valuation, intermediation and investmentfunds. In response, the IOSCO Board identified crypto-assets as one of its topwork priorities for 2019 and 2020.

In January 2018, IOSCO issued a Statement on concerns related toInitial Coin Offerings (ICOs),  noting the risks associated with ICOs,particularly regarding parties that target retail investors through onlinedistribution channels, often from outside the investors' home jurisdiction. Crypto-assetsdistributed in an ICO are highly risky investments and vulnerable to abuse andfraud.

In 2019, as the first step in developing theeducational material, IOSCO´s Committee 8 on Retail Investors conducted afact-finding survey of its members regarding crypto-assets. IOSCO acknowledgesthat not all of the report´s material or educational approaches may beappropriate for all member jurisdictions or consistent with all members' legaland regulatory frameworks. Instead, it recommends that members adopt thematerial and educational approaches best suited to their respectivejurisdictions.

An Appendix to the report providesexamples of IOSCO members' use of different investor activities and initiativesregarding crypto-assets. 

RelatedLinks

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