An ICO or Initial Coin Offering (sometimes referred to as initial currency offering) is a system of funding new blockchains and their native cryptocurrencies at the startup fase of operation. Primarily the ICO funding process is offered as crowdfunding (open to all investors, private and public), but we are seeing an increase in private ICO’s (funded soley by corporate investors). At the ICO stage, the company behind the blockchain offer a quantity of it’s cryptocurrency to be sold in the form of “tokens” (“coins”) to investors, in exchange for fiat currency or other cryptocurrencies. Due to the volume of such cryptocurrencies and the volume of holders, cryptocurrencies such as Bitcoin or Ethereum are primarily used, but we are seeing an increased number of possibilties in this respect.
Promotion and regulation of Initial Coin Offering
Tokens being sold are promoted by the startup company as future functional units of currency once the ICO’s funding goal is met and the project launches. In many offerings, like Ethereum and Tron, these tokens are integrated into the operation and functionality of the product. Becasue many ICOs are able to allow startups to avoid regulatory compliance and institutions such as venture capitalists, banks and stock exchanges., ICOs may fall outside existing regulations. As such, in some jurisdictions, such as China and South Korea, ICOs have been banned.
Initial Coin Offering scams
Sadly, many ICOs have been proven to be scams, or have fallen foul of securities law. In most of these instances investors have lost their total capital investment. As such, wise cryptos cannot actively support investing in any ICO, and must advise anyone wishing to invest, to research each individual project in detail, and proceed with extreme caution. Much like with mainstream startups, fewer than half of all ICOs are active within four months after the ICO has completed. Despite many highly publicised scams, and failures to achieve the intended goals, and the dramatic drop in the prices of cryptocurrencies, $7 billion was raised by ICOs between January–June 2018.
View all ICOs on Wise Cryptos
Wise Cryptos has gathered together thousands of Initial Coin Offerings and we have separated them into easy to navigate categories:
- Current ICOs – Initial Coin Offerings which are currently active and open to purchase
- Future ICOs – Announced ICOs which are not yet available for investment
- Finished ICOs – These are completed Initial Coin Offerings which have finished their ICO (either succesfully or not)
Wiki definition of an Initial Coin Offering
An initial coin offering (ICO) or initial currency offering is a type of funding using cryptocurrencies. Mostly the process is done by crowdfunding but private ICO’s are becoming more common. In an ICO, a quantity of cryptocurrency is sold in the form of “tokens” (“coins”) to speculators or investors, in exchange for legal tender or other cryptocurrencies such as Bitcoin or Ethereum. The tokens sold are promoted as future functional units of currency if or when the ICO’s funding goal is met and the project launches. In some cases like Ethereum the tokens are required to use the system for its purposes.
An ICO can be a source of capital for startup companies. ICOs can allow startups to avoid regulatory compliance and intermediaries such as venture capitalists, banks and stock exchanges. Many ICOs may fall outside existing regulations, depending on the nature of the project, or be banned altogether in some jurisdictions, such as China and South Korea.
ICOs have been prone to scams and securities law violations. Fewer than half of all ICOs survive four months after the offering, while almost half of ICOs sold in 2017 failed by February 2018. Despite their record of failure and the falling prices of cryptocurrencies, a record $7 billion was raised via ICO from January–June 2018.
Source – Wikipedia
Due to the high number of scams associated with initial coin offering, Wise Cryptos does not recommend investing in any ICO.
Click here to view all active cryptocurrencies which have either passed their Initial Coin Offering or launched without an ICO at all.
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Initial Coin Offerings (ICOs) – The SEC’s Official Stance
Companies and individuals are increasingly considering initial coin offerings (ICOs) as a way to raise capital or participate in investment opportunities. While these digital assets and the technology behind them may present a new and efficient means for carrying out financial transactions, they also bring increased risk of fraud and manipulation because the markets for these assets are less regulated than traditional capital markets.
- ICOs can be securities offerings – ICOs, based on specific facts, may be securities offerings, and fall under the SEC’s jurisdiction of enforcing federal securities laws.
- They may need to be registered – ICOs that are securities most likely need to be registered with the SEC or fall under an exemption to registration.
- Tokens sold in ICOs can be called many things – ICOs, or more specifically tokens, can be called a variety of names, but merely calling a token a “utility” token or structuring it to provide some utility does not prevent the token from being a security.
- ICOs may pose substantial risks – While some ICOs may be attempts at honest investment opportunities, many may be frauds, separating you from your hard-earned money with promises of guaranteed returns and future fortunes. They may also present substantial risks for loss or manipulation, including through hacking, with little recourse for victims after-the-fact.
- Ask questions before investing – If you choose to invest in these products, please ask questions and demand clear answers.
What investors need to know
So, what do you need to know about ICOs before investing? Start with some basic research on Investor.gov and take note of the following:
- Products can be sold and traded internationally – Recognize that these products are often sold on markets that span national borders and that significant trading may occur on systems and platforms outside the United States. Your invested funds may quickly travel overseas without your knowledge. Although the SEC actively enforces securities laws, risks can be amplified, including the risk that market regulators may not be able to effectively pursue bad actors or recover funds.
- Research your financial professional – Understand the opportunity that is being presented, and do your homework on the individual who is doing the presenting. Is the offering legal and is the person offering this product licensed to do so? Make sure you visit investor.gov for more resources before you invest. Arm yourself with knowledge from this Investor Bulletin.
- If an investment sounds too good to be true, be cautious – As with any other type of potential investment, if a promoter guarantees returns, if an opportunity sounds too good to be true, or if you are pressured to act quickly, please exercise extreme caution and be aware of the risk that your investment may be lost.
- Understand how the product is traded – Many platforms for trading digital assets refer to themselves as “exchanges,” which can give the misimpression to investors that they are regulated or meet the regulatory standards of a national securities exchange.
What market professionals need to know
As SEC Chairman Jay Clayton has stated, tokens and offerings that feature and market the potential for profits based on the entrepreneurial or managerial efforts of others contain the hallmarks of a security under U.S. law.
- Use caution before promoting offers and selling coins – Market participants should use caution when promoting or touting the offer and sale of coins without first determining whether the securities laws apply to those actions. Similarly, those who operate systems and platforms that effect or facilitate transactions in these products should be aware that they may be operating unregistered exchanges or broker-dealers that are in violation of the Securities Exchange Act of 1934.
- The SEC protects Investors, and expects you to – Gatekeepers and others, including securities lawyers, accountants and consultants, should be guided by the principal motivation for the SEC’s registration, offering process and disclosure requirements: Investor protection and, in particular, the protection of Main Street investors.
- SEC Report of Investigation on Coin or Token Offerings – Market professionals, including securities lawyers, accountants and consultants, are encouraged to read closely the 21(a) investigative report the SEC released in 2017, concluding that a particular token was a security.
- Know when an exchange needs to be registered – If a platform offers trading of digital assets that are securities and operates as an “exchange,” as defined by the federal securities laws, then the platform must register with the SEC as a national securities exchange or be exempt from registration.
Source – SEC
Due to the high number of scams associated with initial coin offerings, Wise Cryptos does not recommend investing in any ICO. There are many sources quoting anything from 80% up to 95% failure rates of Initial Coin Offerings for one reason or another. While the exact figures are difficult to accurately identify, the overall trend is worrying and investing in an ICO often feels as risky as gambling at a cryptocurrency casino. This is a real shame for the genuine projects with real promise and practical and useful real world application.