IOSCO Warns Investors on Crowdfunding & Bitcoin Risks
The International Organization of Securities Commissions – IOSCO – has put crowdfunding on their list of investors risks, together with Bitcoin and other cryptocurrencies.
Investors all over the world are looking for ways to diversify their portfolio. Rather than sticking with government bonds, stock market trading, or foreign currency, new and disruptive models are starting to gain more traction. Among these concepts are both crowdfunding and digital currencies, both of which pose a significant investor risk according to IOSCO.
Security regulators from all over the world make up IOSCO, which has the primary goal of implementing and promoting adherence to the international strategies of securities regulation. Moreover, ISCO members seek to share their knowledge and guidance with investors all over the world, making them aware of potential risks and pitfalls.
Some people may recall the previous investor warning issued by the IOSCO as they were not too keen on the concept of FinTech last year. In fact, the organization mentioned how “regulators have got to wake up quickly and get up to speed.”
This demonstrated how the organization was behind the curve on catching up on what FinTech embodies. Now that they are warning on crowdfunding and cryptocurrencies such as Bitcoin, it seems that they are straggling once again, as even the world’s major banks have since shifted to studying Bitcoin’s underlying and potentially disruptive technology, the blockchain.
Some examples of potential channels for changes brought about by technological revolution – often referred to as ‘digital disruption’ – in securities markets include: robo-advice for investment; payments (i.e. crypto currencies); capital raising through crowdfunding and peer to peer lending; the proliferation of Smartphone nance “apps”; distributed ledger technology; and the use of ‘big data’ to better understand the needs of financial services consumers.
While there is a point to be made as to how investors need to tread carefully in the dangerous investment landscape, most of them are perfectly capable of assessing risks themselves. Crowdfunding and cryptocurrency are not new concepts by any means, as they have been around for several years now. However, it is not the first time IOSCO had issued a warning on these investment opportunities either.
Bitcoin & Crowdfunding Will Disrupt
It is also worth noting how the report mentions there are five different areas of innovation, which will disrupt the financial services sector as we know it. Technology giants are entering the payments industry, and finance applications on smartphones are becoming more widespread than ever before.
But the real innovation is coming from the equity crowdfunding and peer-to-peer lending platforms. Both solutions offer an alternative form of financing for SME’s and entrepreneurs all over the world. Since neither of these concepts can be controlled by banks or governments, it is not unexpected to see IOSCO issue a warning for investors.
What are your thoughts on this IOSCO report? Is there anything else in there which has caught your attention? Let us know in the comments below!
