Initial Coin Offerings (ICO’s) and Cryptocurrency
Initial Coin Offerings Make Headway
In the digital world, Initial Coin Offerings (ICOs) surfaced as a creative method of subsidizing start-up enterprises through the issuance of electronic tokens that online traders can either buy or sell. Cryptocurrencies like Bitcoin and Ethereum inspired such tokens. Enterprising entrepreneurs use the networks of these currencies to launch the ICOs. Merchants sell virtual coins and use them to finance development of start-ups.
All of a sudden, the popularity of said offerings flourished at the beginning of 2017 with more than $2 billion collected since the first quarter. ICOs surpassed venture capital as a primary funding source and attracted businesses looking at Blockchain technology applications. The emergence of Initial Coin Offerings as potential sources of venture financing also captured the attention of various Securities and Exchange Commission’s which regulate sales of digital coins.
The United States SEC declared virtual tokens as securities subject to federal legislation arising from the Decentralized Autonomous Organization (DAO) debacle in 2016. A corporation from Germany allegedly supported the DAO which put up $150 million worth of offering last year. The organization convinced some people to purchase tokens supposedly for a computerized investment scheme giving token owners the right to claim rewards or dividends.
Stringent regulatory initiatives imply that investors and ventures must carry on very carefully when it comes to engaging in cryptocurrency activities. Regulators say the move safeguards unknowing consumers from possible exploitation although the rigid rules hamper innovation. In fact, advocates of Blockchain and Bitcoin insist the government has no right to tax income if it does not know the type of income referring to all cryptocurrencies.
John McAfee, founder of leading Internet security and software provider, McAfee Incorporated argued that there is no way to originate any law that will stop virtual currencies because of technical restrictions.
Blockchain Technology and Crypto Activities
People have grown wiser regarding the use of cryptocurrencies following the Bitcoin’s pricing peaks this year. More and more companies joined the Blockchain bandwagon due to its potential of altering outcomes in different industries. Nonetheless, the platform along with cryptocurrencies remain in the background and yet to come out in the open. Consumers and businesses cannot at this point use the technology and engage in transactions using virtual currencies every day.
Significant differences arose between investors, code developers, programmers, and miners of Bitcoin. Debates rage about scaling Bitcoin protocol to handle increasing demand for the currency and result in the fork as well as another Bitcoin “Gold Currency.” Blockchain continues to dislocate the financial services sector. In the meantime, space exists between the capabilities or capacity of Blockchain and digital currencies and the manner in which consumers transact financially.
Blockchain needs to help the public to transition from the current state of affairs to a more radical monetary environment such as going to the bank and exchange traditional currencies like the USD and EURO to BTC and vice-versa.
Established institutional cannot just start supporting digital currencies without clear laws, guidelines, and benchmarks. Banking remains a highly-controlled activity so rules must first be modified or approved to become accustomed to using cases of virtual currencies. On the other hand, advocates and patrons of the Blockchain model contend that restricted use does not imply inadequate innovation and resourcefulness. Regulations stifle the platform thereby reducing its capacity to facilitate services in specific marketplaces.
Initial Coin Offerings appeal as funding source due to the relative promptness in raising resources so Blockchain start-up firms can develop and experiment with their business concepts. Unfortunately, the days of swift or breakneck offerings may cease for some markets like China after the government decided to ban ICOs abruptly. On the other side of the equator, the Securities and Exchange Commission has closed down ICO activities in the United States.
Before this action, the SEC quietly circulated a so-called investor alert cautioning prospective investors about the risks involved in joining ICOs. Instead, the Agency ruled that investors can only take part in future token sales by way of the Simple Agreement for Future Tokens or SAFT. Strict restrictions on these offerings give liberal bureaucracies such as Japan and Singapore to become sanctuaries for Initial Coin Offerings as well as cryptocurrencies. These two countries have shown more positive attitudes towards Blockchain as a result of practical and down to business legislation.
Japan and Blockchain
The decision of the Japanese Government to accept BTC as a legitimate method of payment proved to be a victory for the digital currency community. Japan compelled business entities to include traditional physical retail outlets to give their support to Bitcoin. Aside from this move, the nation added more measures are enhancing protection for investors as a result of occurrences like the Mount Gox breakdown. Finally, the Japanese exchange, Coin Check introduced a program for investments for Blockchain start-up companies.
Mt. Gox used to be the largest Bitcoin exchange located in Shibuya (Tokyo), Japan and launched in 2010. Only three years after, the exchange already handled more than 70% of global BTC transactions. Mt. Gox became the most prominent broker for the cryptocurrency and number one exchange worldwide. In February of 2014, management stopped all trading activities, shut down its website as well as exchange service and filed for insolvency protection from creditors. Four months later, the company initiated liquidation procedures.
Mt. Gox revealed that someone pilfered around 850, 000 coins belonging to clients with a market value of over $450 million at that time. They recovered some 200, 000 coins but up to now, the actual reason for the fortune’s mysterious disappearance never came out. Observers believe it could have been theft, mismanagement or fraud.
Need for Sense of Stability
Industry players must work hard to create equilibrium within the cryptocurrency ecosystem. Governments must avoid being inflexible just because virtual currencies do not fall under the pattern of conventional financial services. Maybe, political leaders and the private business community must collaborate to enact rules and laws that will protect the public from manipulation and scams. Regulators must implement regulations that will permit room for conformity and innovation.
A new emerging company is said to be coming out in 2018 called InfluenceMine. They are touted to be a Hydromining company that is “Green” which saves money in coin production. They have not been released yet and only remain to be a rumor at this point, be we will be sure to keep you updated and add information about them here as we get it.