Many fear ICOs, which are trying to market themselves as an alternative to venture capitalists as a way of raising cash for businesses, breach existing securities law.

"An ICO issues crypto tokens rather than stocks and bonds, but that's irrelevant to the substance of the activity, which is raising capital from the general public," said Ajit Tripathi, a director in fintech at PwC. "Capital raising activities need to be regulated to protect investors . . . The question is how sophisticated are these investors?"

Regulators, who in many cases are still catching up with how to deal with bitcoin, are only just becoming aware of this spin-off sector.

Japan moved to tighten regulation of bitcoin trading and dealing only last month. The move forced bitcoin exchanges to register with the state and to comply with know-your-customer and anti-money-laundering regulations, adding costs to their business.

Observers say many individuals are trading alt-coins from corporate IT departments, concentrated in the financial sector and falling under the radar of senior executives. Many are sitting on virtual fortunes, but are unable to liquidate their cash as banks clamp down on measures to avoid money laundering.

"Systems are being used here by employees to increase their own individual wealth. In the process, corporate systems are coming into contact with the fringes of the criminal world," said Brian Lord, former deputy director for intelligence and cyber operations at GCHQ, the UK's electronic surveillance agency .

Now head of cyber practice at security group PGI, he added that it was likely very few companies had governance in place regarding crypto currency being traded on their systems.

ICOs, or "token sales", are also starting to attract venture capitalists such as billionaire and early bitcoin supporter Tim Draper, who announced plans to invest in the highly anticipated launch of Tezos this month. The token is expected to garner big support from the sector's many unregulated exchanges, many of whom have the capacity to make or break a new coin.

"We are just looking at whether they are going to be popular, they are selling you a dream. The dream is either going to happen or not and that's why they are exciting for people," said Arthur Hayes, a trader at Bitmex, a crypto derivatives exchange. "That tension is great for an exchange."

Other traders were more cautious about the market's potential. "Is it sustainable? Absolutely not," said one trader at a dealing venue. "But while it's happening, it's happening. The biggest risk is that the SEC steps in."

Financial Times