LONDON (Reuters) - Gibraltar will introduce the world’s first regulations for initial coin offerings with dedicated rules for the cryptocurrency sector whose fast growth has triggered concern among central bankers.

FILE PHOTO - Representation of the Bitcoin virtual currency standing on the PC motherboard is seen in this illustration picture, February 3, 2018. REUTERS/Dado Ruvic/Illustration

They are worried about financial stability and protecting consumers but regulators have so far adopted a patchwork approach to ICOs, ranging from bans in China to applying existing securities rules in the United States.

This has created legal uncertainty for transactions that sometimes straddle many countries.

An ICO involves a company raising funds by offering investors tokens in return for their cash or cryptocurrency such as bitcoin, as opposed to obtaining shares in the company from a traditional offering.

Over $3.7 billion was raised through ICOs last year, up from less than 82 million euros in 2016, a leap that has rung alarm bells among central bankers as some firms rush to issue tokens before new rules are introduced.

Gibraltar’s government and Gibraltar Financial Services Commission (GFSC) said lawmakers will discuss a draft law in coming weeks to regulate the promotion, sale and distribution of tokens connected with the British overseas territory.

The GFSC said it would represent the first set of bespoke rules for tokens in the world.

“One of the key aspects of the token regulations is that we will be introducing the concept of regulating authorized sponsors who will be responsible for assuring compliance with disclosure and financial crime rules,” said Sian Jones, a senior adviser to the GFSC.

The regulation will establish disclosure rules that require adequate, accurate and balanced information to anyone buying tokens, the government and Financial Services Commission said in a joint statement.

Central bankers have lined up in recent weeks to call for cryptocurrencies and ICOs to be regulated, saying that while innovation in finance can bring benefits, consumers must be protected.

“Tokens could post substantial risks for investors and can be vulnerable to financial crime without appropriate measures,” the finance ministers and central bank governors of France and Germany said in a letter on Friday.

“In the longer run, potential risks in the field of financial stability may emerge as well,” said the letter calling on the Group of 20 economies (G20) to discuss cryptocurrencies at their next meeting.

Gibraltar’s move is being closely watched by regulators from across the world, including Britain and Singapore, who may come forward with their own rules.

Jay Clayton, head of the U.S. Securities and Exchange Commission, said on Tuesday that tokens are securities and subject to the same investor protection rules as share offerings.

French markets watchdog AMF published a discussion paper last October on ICOs, but it has not yet said if it will push ahead with rules.

Gibraltar is looking to boost its thriving financial services industry beyond gaming after Britain, along with Gibraltar, leave the European Union in 2019.

It blazed a trail in January by introducing the world’s first bespoke license for “fintech” firms using the blockchain distributed ledger technology that underpins ICOs.

“We remain fully committed to ensuring that we protect consumers and the reputation of our jurisdiction,” said Albert Isola, Gibraltar’s commerce minister.

Gibraltar is also reviewing its rules for investment funds that involve cryptocurrencies and tokens.

($1 = 0.8159 euros)