IOSCO is pleased to release its Final Report on Investor Education surrounding Crypto-Assets. This Report summarizes the results of a survey distributed to members of IOSCO’s Committee for Retail Investors (C8) in autumn last year about retail investor behaviour, demographics, and experiences with crypto-assets.
Crypto-assets have been a key priority for IOSCO for some time and in 2022 it established a Board-level FinTech Task Force to develop, oversee, deliver and implement IOSCO’s work with respect to FinTech and crypto-assets. Early work has shown that investors are drawn to invest in crypto-assets for three key reasons:
- Fear of missing out” (“FOMO”) or as a speculative investment;
- Low cost of entry; and
- Advice from friends and/or social media.
Today’s Final Report highlights examples of regulatory changes and enforcement activity by C8 members since the related 2020 report, as well as current priority issues around investor education in the crypto-asset space, such as relationship investment scams and the need to communicate with retail investors on, and about, social media.
The Report suggests specific investor education messages which C8 members could consider when driving forward education of crypto-assets in their local jurisdiction.
- Investments in crypto-assets can be exceptionally risky and these assets are often volatile.
- Investors should be wary of investments promoted on social media and use skepticism when following “finfluencers.”
- Crypto-asset investments might lack basic investor protections, as those offering crypto-asset investments or services may not be complying with applicable law, including registration and licensing requirements.
- Investments offered in compliance with a jurisdiction’s regulatory framework confers investors with certain investor protections.
- Fraudsters continue to exploit the rising popularity of crypto-assets to lure retail investors into scams, often leading to devastating losses.
- Understanding the nature of investing generally, including having an investing plan, and understanding risk tolerance and time horizon, as well as understanding the nature of investing in crypto-assets, can be critical to overall and long-term investing success.
Jean-Paul Servais, Chair of IOSCO, commented: “With such growing widespread interest in crypto-assets, retail investors are subject to unique risks. 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.”
Taking place over the course of this week, IOSCO’s annual World Investor Week is a platform to promote financial education and literacy. https://www.worldinvestorweek.org/.
Mr Servais added: “Financial education is a complementary tool to regulation and supervision to enhance investors’ awareness, critical sense and rational behaviour. Financial literacy must go hand in hand with appropriate investor protection measures, fair advice, supervision and enforcement of rules.”
