According to the International Organization of Securities Commissions, which Kenya is a member, some of the risks associated with ICOs are as follows:

The heightened potential for fraud: while some ICOs are backed by genuine teams and innovative ideas for products and services, there is a risk that some are launched by fraudsters. Since ICOs are unregulated, investors risk being the victims of such frauds.

Cross-border distribution risks: If the investor is operating the ICO outside the investor’s jurisdiction, tracking the money and recovering it in the event the ICO collapses can be difficult.

Information asymmetry: the complex nature of ICOs and the uncertainty surrounding the rights and interests of investors results in most ICO participants not understanding the risks, costs, the expected returns, and the expected drivers of risks and returns emanating from their investments. As a result, they cannot make informed decisions regarding such investments and may be vulnerable to fraud.

Liquidity risks: Generally, cryptocurrencies and ICO tokens are traded on virtual exchanges which might give rise to opaque and volatile pricing and insufficient liquidity to support dependable trading and market-making activities. In some countries, these exchanges are unregulated. Therefore, investors are exposed to volatile prices and the possibility of being unable to exit their holdings.