Initial Coin Offerings (ICOs) have been around for a short time, yet, they managed to attract a lot of global attention. While numerous ICO projects are gathering millions of dollars everyday, do we really know what they are?
30 October 2018 – In the course of the past year and a half, there has been a crazy increase in Initial Coin Offerings (ICOs) globally. A lot of these ICOs, in fact, did not bring anything new or necessary to the world. Such ICOs might just ride the wave of popularity in order to gain some exposure as well.
What are ICO tokens: Classification Dilemma
There has been a lot of discussion in the markets regarding Bitcoin and other cryptocurrencies. Some claim that Bitcoin is a bubble, and others are questioning the value behind cryptocurrencies. Amid all this uncertainty, governments ruled out that cryptocurrencies are not currencies per se. Instead, cryptos are now perceived as goods or commodities.
Yet, it seems that all these suggestions might be wrong. The US regulator SEC has commenced exploring ICOs, as it later decided that these assets can be seen as a stock or ownership. This fact could have an enormous impact on the future of investing.
Numerous studies of ICOs exposed that most of ICOs are failing pretty quickly. This does not seem surprising considering the fact that a lot of ICOs do not actually have a business plan in mind. Such fraudulent ICOs are usually not transparent and they are just looking to capitalize on the hype of Blockchain and cryptocurrencies.
At the same time, taking into consideration the feature of decentralization of cryptocurrencies, many people prefer them over the conventional financial system since they are more transparent. Yet, it is not likely that Bitcoin, the leading cryptocurrency, might overcome the US dollar in popularity in any near future.
Having said that, market experts believe that this might be just the time for Blockchain assets to rebrand themselves. Instead of seeing tokens as coins, it might be a good idea to look at them as if they were crypto stocks. Blockchain tokens provide their owners with an access to the underlying platform in question, so they might also give them special platform rights. These might include ownership rights, voting rights, and dividends.
SEC Suggests ICOs Can be Seen as a form of stock ownership
The SEC attempted to highlight the dangers involved in investing in ICOs without actually fully vetting them. The regulator has even organized a fake website about a “HoweyCoin” ICO in order to illustrate this point.
The SEC aims to make potential investors do their due diligence when it comes to ICOs. This means collaborating with a professional who knows the specifics of the cryptocurrency market. It is necessary to perform background checks regarding the team that runs a particular ICO.
The US regulatory body has stated that ICOs will become more regulated in the future. The commentary from SEC suggested that the tokens produced from an ICO might be a form of stock ownership. Additional regulation can further have a stabilizing effect, thus reducing the number of failed ICOs.
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