Retail investors must be more educated about the risks associated with crypto assets, especially when it comes to investments promoted on social media or lacking basic investor protections.
This was the main finding from the final report on investor education and crypto assets by IOSCO, the global standard setter for securities market regulators.
IOSCO set up a fintech task force in 2022, specifically to look into the risk of making crypto assets available to retail investors.
In addition to the threat of scams and fraudsters, IOSCO has also called on securities regulators to promote a better understanding of investing generally among retail participants, including having an investing plan, and understanding risk tolerance and time horizons.
“With such growing widespread interest in crypto-assets, retail investors are subject to unique risks,” said Jean-Paul Servais, chair of IOSCO.
“Market events have shown that the industry carries high levels of volatility, failures, and bad actors causing harm to investors and the markets.
“It is not surprising, therefore, that crypto-asset education is one of IOSCO’s top priorities and forms a big part of this year’s World Investor Week, which highlights a number of common challenges that we all face as financial regulators and as financial consumers.”
IOSCO’s recommendations have been backed by the World Federation of Exchanges (WFE), although it called for regulators to approve more crypto-related financial products if they are listed or traded on regulated exchanges.
“Broadening the pool of investible securities is always beneficial for investors as it provides more choice,” said Nandini Sukumar, chief executive of the WFE.
“The complexity lies in ensuring those investible securities are suitable to trade and operate within appropriate, and secure, parameters. Crypto-assets have been a case in point. Exchange-traded public markets, and products, place investor protection at the heart of their model.”
