Token offerings (ICO, IEO, IDO) and crypto exchanges
Raising money by creating a cryptoasset (a "token") and selling it to buyers, directly or through a crypto exchange. It is very high risk, heavily restricted in the UK, and about to be regulated much more tightly.
- No security
How it works
A business creates a digital token on a blockchain and sells it to raise money. Buyers usually get the token itself, not shares in your company, and hope its value will rise or that it will give access to a product or network.
Ways to sell a token
- ICO (initial coin offering): you sell tokens directly to the public, usually from your own website.
- IEO (initial exchange offering): a centralised exchange runs the sale and then lists the token for trading.
- IDO (initial DEX offering): the token is launched on a decentralised exchange.
Types of exchange
- CEX (centralised exchange): a company runs the trading platform, matches buyers and sellers, and usually holds customers' assets for them.
- DEX (decentralised exchange): trading runs through automated software ("smart contracts") on a blockchain. Users usually keep control of their own assets.
- Hybrid exchange: combines the two, for example matching orders centrally while settling trades on the blockchain.
UK rules today. Since 8 October 2023, any promotion of cryptoassets to UK consumers must be communicated or approved by an FCA-authorised firm or an FCA-registered cryptoasset business, or fall under an exemption. Promotions must carry risk warnings, include a cooling-off period, and cannot offer incentives to buy.
From 25 October 2027. A new FCA regime begins. Public offers of qualifying cryptoassets in the UK will be banned except under set exceptions. The main one is an offer conditional on the token being admitted to trading on an authorised UK cryptoasset trading platform, with a disclosure document (a QCDD) published. Running a trading platform, dealing, arranging, custody and staking will all need FCA authorisation. Whether a DEX interface falls within the rules depends on whether an identifiable person carries on a regulated activity in the UK as a business.
Tokens that work like shares or bonds (security tokens) are treated as securities, with their own rules.
Upsides and downsides
Upsides
- Can reach a global pool of buyers
- Can raise money without selling shares in the company
- Tokens can give users a stake in a network or product
Downsides
- Very high risk for buyers. The FCA warns they should be prepared to lose all their money
- Strict UK promotion rules today, and a ban on most public offers from October 2027 except through authorised platforms
- High legal, technical and compliance costs
- Token prices can swing wildly, damaging your reputation with customers
Risks
- Breaking promotion or offer rules, which can be a criminal offence
- Smart contract bugs, hacks or exchange failures
- Scams and copycat tokens using your name
- The token's value collapsing, along with trust in your business
What it costs
- How it is priced
- Tokens sold to buyers, plus legal, technical, exchange listing and marketing costs
- Costs that are easy to miss
- Legal advice on the token's status and on UK and overseas promotion rules
- Building and auditing the smart contracts
- Exchange listing fees and payments to market makers
- Compliance costs, which rise sharply under the 2027 regime
No standard range. From 25 October 2027, UK public offers will generally need admission to an authorised UK platform and a disclosure document.
Does it fit?
Could fit when
- Your product genuinely needs a token, for example a blockchain network where the token has a real use
- You can afford specialist legal and technical advice and full compliance
Unlikely to fit when
- You simply need money for an ordinary business (shares or loans are far simpler)
- You cannot get a UK-authorised firm to approve your promotions
- You cannot meet the 2027 regime's disclosure and platform requirements
Who can use it
- Business types: Private limited company, Public limited company
- Open to businesses with no sales yet
- Promotions to UK consumers must be communicated or approved by an FCA-authorised firm or FCA-registered cryptoasset business, or be exempt
- Firms providing cryptoasset services must register with the FCA under the Money Laundering Regulations, and from 25 October 2027 need full FCA authorisation
Am I ready?
What a provider is likely to ask for. Tick what you have. Your ticks stay in this browser and nothing is stored. Checklist for all tokens and digital assets
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0 of 4 ticked
- Legal analysis of the token
- Promotions approved
- Smart contract audit
Regulation and protections
Cryptoassets are largely unregulated today, so buyers are highly unlikely to be covered by the Financial Services Compensation Scheme. Promotions are regulated now, and the FCA's full regime starts on 25 October 2027.
Check any exchange or platform on the FCA Register. Firms can apply for authorisation under the new regime from 30 September 2026 to 28 February 2027.
Types of provider: Centralised cryptoasset exchanges (CEX); Decentralised exchanges (DEX); Hybrid exchanges; FCA-authorised firms that approve financial promotions.
Also consider
Sources
- FCA: Cryptoassets (information for firms) · checked 7 October 2026
- FCA: Cryptoassets (consumer information) · checked 7 October 2026
- FCA: A new regime for cryptoasset regulation · checked 7 October 2026
- FCA: Overview of our cryptoassets regime policy statements · checked 7 October 2026
- FCA: PS26/9 Crypto regime: admissions and disclosures and market abuse · checked 7 October 2026
- FCA: PS26/18 Cryptoasset perimeter guidance · checked 7 October 2026