One of the hottest scenes in the cryptocurrency community today revolves around what’s known as an “ICO,” or initial coin offering. An ICO is a kind of futuristic fundraising round. Rather than relying on regulations and lawyers to guide investment, developers of an upcoming project solicit funds to build out a planned technology platform in exchange for tokens that investors can then trade or use on the platform itself when it is complete. Developers gain access to needed funding in order to make their vision a reality. Investors are rewarded for their early insight with profits and first access to the platform. Everyone wins, and innovation proceeds apace.
At least, this is the ideal. In practice, a lot of ICOs end up being unexpectedly complex works-in-progress (to be extremely charitable) at best and outright scams at the worst. A tiny handful—we’re talking maybe two or three—of ICOs seem to have lived up to their promises. Maybe others will follow. But a worrying number of them have unfortunately looked more like fly-by-night get-rich-quick cons hoping to piggyback on the buzz of the cryptoeconomy than an innovative funding mechanism for the technologies of tomorrow.
For these reasons, securities regulators across the world have started to turn a sharp eye to the ICO space, with important implications for the future of this kind of project structure. In the US, the Securities and Exchange Commission (SEC) has been closely watching the ICO space for some time, and it has recently signaled that it may undertake more rigorous interventions in coming months. Andrea O’Sullivan delves into the details.
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