Initial Coin Offerings have scarcely been out of the news lately. A number of high profile scams, bans, and regulatory plans have seen them eating up column inches. But where does that leave the genuine value startups and those wishing to invest in them?
The Background
An ICO in its most basic form is used as a tool for finding backers to raise funds for new blockchain projects. A company will pre-sell a coin (or token) for use within the ecosystem of a final product, in order to finance the creation of that ecosystem.
Unfortunately, some ICOs fell victim to scammers, causing investors to lose their money. In addition, many companies simply offered coins for coins sake, having no further value to backers other than speculative price rise. These essentially behaved like thinly veiled securities, and quite rightly attracted the attention of regulatory authorities.
Thus we have the SEC, the MAS, BOC and who knows how many other acronymous agencies in a panic.
The Good News
This is for the benefit of the entire industry. Genuine startups do not want to fall foul of the law. Their founders do not want to risk a hefty fine or prison sentence. Investors do not want to spend their money on an ultimately worthless token. The attention of the regulators should weed out the bad players.
Other than China’s outright ban, the message seems to be fairly clear and consistent. An ICO in its truest form will not fall into the category of securities. As long as the token has value other than a speculative one, it should not be subject to regulation.
How to Be Sure
Many companies are contemplating holding an ICO and they need regulatory certainty to be able to feel comfortable with their decision.
Eric Ly – co-founder of LinkedIn and ICOBox advisor
A number of ICO advisory services are springing up to support startups and empower investors. One such service, ICOBox, is developing and end-to-end ICO process with an innovative way to do just that.
On top of their paid ICO advisory service, they will also offer a way for companies to hold an ICO if they don’t even have the capital to fund that. They are accepting applications from underfunded start-ups, which they will pre-vet and then put forward to their ICOS token holders.
Ultimately, the token holders will vote on which projects should go forward to the formal ICO stage. ICOBox will finance these offerings using the funds amassed through ICOBox’s own ICO.
All Systems Go!
With the right legal advice, startups (outside of China at least) should be able to confidently navigate the process. If an ICO is used as originally intended then there is no reason that it shouldn’t be plain sailing.
And with services like ICOBox, investors can take heart in the fact that they are more likely to avoid the pitfalls which have beset some projects so far.
The emergence of full-service ICO advisory platforms will help address the quality issues surrounding ICOs
Keith Teare – co-founder of TechCrunch and ICOBox advisor