The chief financial regulator in the UK is stepping up its scrutiny of ICOs, as it considers whether further legislative measures may be required.

The Financial Conduct Authority (FCA), the body responsible for market oversight in the UK, announced it was conducting further research into the extent to which ICOs are covered by current financial regulations, and whether further measures could be introduced to regulate the funding model.

The announcement, as part of a feedback statement released last week, goes further than the warnings already issued by the regulator back in September, designed to highlight the risks of investing in ICOs.

In September, the regulator cautioned against the unregulated nature of many ICOs, and warned retail investors in particular that ICOs were “very high-risk, speculative investments,” without the same investor protections as other asset classes.

The latest feedback statement said the Financial Conduct Authority would now engage in a more in-depth examination of developments since its earlier research papers, to inform the regulator on the latest regulatory risks associated with initial coin offerings and help shape policy on ICOs for future.

Pending the outcome of the report, the next step could see draft proposals drawn up to regulate ICOs, or firmer guidance on how existing securities laws apply in the ICO use case.

Price volatility and fraud risk were also among the specifically highlighted risks associated with investing in ICOs, with the regulator calling on ICOs promoters to conduct their offerings for ‘consumer benefit’.

The development comes at a time of increasing scrutiny for ICOs worldwide, as financial regulators rush to identify the right regulatory response amid a surge in activity.

ICOs have enjoyed exponential growth in 2017, raising as much as £2.3 billion from the sale of tokens and Simple Agreements for Future Tokens (SAFTs).

Regulators across the world have urged caution, with some going further—most notably in China, where an outright ban on ICOs marked the most decisive global response thus far.

While there are no suggestions the FCA could move to ban ICOs in the UK, their findings may point to the need for further regulation to tighten up the rules for initial coin offerings.

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