I had also never heard of this, so did a bit of googling. Seems to be:

The problem for companies using the .io domain is that it represents the continued oppression of the original people of the Chagos archipelago. All proceeds from the registration of domain names goes to the Internet Computer Bureau, a former British company now owned by Affilias, a US company. Some of the profits from sales were supposed to go to support the territories, but the British government declared it has never received any money for this, and subsequently denied any responsibility for the support of the Chagossian people.

https://tamouse.github.io/blog/politics/2019/10/02/why-is-th...