ICOs have become quite popular to bypass rigourous processes put in place by institutions for startups to raise money and thus finance their activity/project.
However, with no consensus on their legal status and the regulation that should apply, many countries and their institutions are advising people to be cautious due to the high volatility and level of risks linked with cryptocurrencies. Shall ICOs be regulated as IPOs and obey existing securities regulations? In order one to make his own opinion about it, here are some of the pros and cons of such a regulation:
-Disadvantages: if money raising fraudulent, no jurisdiction to protect the investors, no equitable ownership, no rights equivalent to being a shareholder, companies have not produced yet any real or tangible results, anonymised transactions
-Advantages: in an ICO, the company may not be subject to direct tax, very little regulatory oversight, firms can raise funds through individuals trading fiat or other virtual currencies, if the money raised does not meet the required amount, the campaign will be written off as a failure and money returned to backers
Companies have raised $180m in ICOs so far in 2017. The question remains if they will still remain so popular whether the regulations will be tightened and whether tokens would be more considered as stocks/shares. Past ICOs should actually be used as a model or a reference to identify good practises and failures and use it to suggest further improvements from a legal point of view. So far, so good.
However, with no consensus on their legal status and the regulation that should apply, many countries and their institutions are advising people to be cautious due to the high volatility and level of risks linked with cryptocurrencies. Shall ICOs be regulated as IPOs and obey existing securities regulations? In order one to make his own opinion about it, here are some of the pros and cons of such a regulation:
-Disadvantages: if money raising fraudulent, no jurisdiction to protect the investors, no equitable ownership, no rights equivalent to being a shareholder, companies have not produced yet any real or tangible results, anonymised transactions
-Advantages: in an ICO, the company may not be subject to direct tax, very little regulatory oversight, firms can raise funds through individuals trading fiat or other virtual currencies, if the money raised does not meet the required amount, the campaign will be written off as a failure and money returned to backers
Companies have raised $180m in ICOs so far in 2017. The question remains if they will still remain so popular whether the regulations will be tightened and whether tokens would be more considered as stocks/shares. Past ICOs should actually be used as a model or a reference to identify good practises and failures and use it to suggest further improvements from a legal point of view. So far, so good.
This is related to what we're building and my background so I will allow myself an answer.
1) ICOs should be regulate but not like IPOs.
First of all, let's keep in mind that each exchange has different rules for what's needed to list an IPO. There is A LOT of inefficiency in the market which causes incredible time delays and additional fees meaning that a lot of good projects with great potential don't have the ability to launch their IPO.
2) For the investors, these additional fees mean lower profits. It means less access to people who do not have an already high net worth so the rich more easily get richer.
To solve this (and deal with the tax issue too amongst a few other things), we are building a financial exchange built on the blockchain. Regarding the regulation, some entities will be regulated onshore, others not regulated and offshore (offshore does not mean illegal!) so as to be able to provide an umbrella service to companies wishing to launch an IPO/ ICO and the investors.
The way we built the coin to provide stability and security is just an added bonus. (Read here to understand what I mean -> https://www.kela.io/the-coin-that-wont-make-you-rich.html )
I would love your feedback and response to this.
