The Gibraltar Financial Services Commission (GFSC) issued a statement on initial coin offerings on 22 September. The GFSC has noticed the increasing use of tokens or coins based on Distributed Ledger Technology (DLT) as a means of raising finance, especially by early-stage start-ups. The sale of such tokens is often conducted using terms such as initial coin offering (ICO), token sale, initial token offering and the like.

A new regulatory framework for DLT will become operational in Gibraltar as from January 2018 and will regulate the activities of firms, operating in or from Gibraltar, that use DLT to store or transmit value belonging to others, such as virtual currency exchanges. Gibraltar is considering a complementary regulatory framework covering the promotion and sale of tokens, aligned with the DLT framework. In common with regulators around the world, the GFSC says that is continuing to monitor the use of unregulated tokens as a means of raising finance.

The GFSC advises anyone considering investing in tokens through an ICO via Gibraltar to consider:

• Regulation: Do participants understand that tokens and ICOs are unregulated and that they have no recourse to any regulatory authority, financial compensation scheme or ombudsman?

• Volatility: Are they aware that the value of a token may be highly volatile and there may be no way to trade or sell tokens?

• Disclosures: ICO whitepapers are unregulated and may contain inadequate, inaccurate or misleading statements and disclosures.

• Risk appetite: Recognising that investing in early-stage startups is high risk and speculative, can investors afford to lose their entire investment?