Malaysia's Securities Commission, the statutory body that oversees and enforces financial regulation, has issued a statement warning investors of the risks involved in initial coin offerings (ICOs).

According to the statement, released yesterday, ICO schemes may be unregulated, possibly exposing investors to fraud, and could also be involved in money laundering and the financing of terrorism.

Further, the operators of token sales could be based outside the country, meaning recovery of investments "may be subject to foreign laws or regulations."

Investors should be diligent and "carefully weigh the risks before parting with their monies," the regulator concludes.

The statement follows a wave of countries issuing similar warnings against token sales, including Russia and China – where they were recently banned. In the U.S. and elsewhere, authorities like the SEC have also moved to classify ICO tokens as securities in some cases.

Such moves threaten to dampen the soaring popularity of the nascent funding method, which has seen even institutional investors take note.

According to CoinDesk's recent State of Blockchain report, ICOs emerged in Q2 as the world's most important crowdfunding tool in the blockchain space, outstripping VC investment, as well as Kickstarter and other funding platforms. According to the research, venture capital funding reached a total of $235 million for the quarter, while ICOs topped out at $797 million – more than three times as much.

Malaysian Finance Ministry image via Shutterstock