Why ICO Landscape Has Shifted From ‘Bootstrapped’ Projects

With 75% of ICOs now failing the reach their soft cap, the entire market has changed direction. This may also squeeze out the scammers and raise the bar beyond pure start ups entrepreneurs…

Our London correspondent Nick Ayton explores the very essence of an Initial Coin Offering (ICO) and the rapidly maturing market that is already very different from six months ago. It looks like we may soon see the end of the anonymous crowd investing in tokens.

Shifting sands…

There are several forces shaping the ICO market. We will always remember 2017 as the year the ICO took off.  Will 2018 look entirely different and will it be better? Will there be more or fewer deals, will the size and scope of deals be bigger and will we see the end of the pre ICO?

A few months ago I predicted there would be 5,000 or even 10,000 ICOs in 2018 but now I remain less sure given the events of the last three months. And yes, what a few months it has been – with BTC breaking out from its resistance, hard forks and continual attacks, and the Ethereum network rocking and creaking as the ICO becomes its main use case. Transaction fees are rising and new kids on the block NEO, amongst others, trying to make up ground and then we have the pending Investor backlash at Tezos. Several more are likely to follow as investors make their voices heard…  Crypto is on the march and is now unstoppable, I predict it will reach $500 mln in market cap in early 2018.

What a year it has been…

There are forces at work…

The volume of ICOs peaked in October 2017 as ICO money raised overtook VC money with approximately $2.5 billion brought into new projects, although $160 million was stolen and a lot of crypto returned to token buyers as soft caps were not met. It is clear 2017 could have been so much better, and what everyone wants to know how many ICOs were actually scams…

Regulation has been inevitable, like death and taxes, and the entire ICO spectrum has moved to consider the implications of not only existing banking and payment regulations but of new emerging regulations. There has been a continual stream of announcements from governments either banning ICOs, licensing them, and shutting some down while others are temporarily ignored. Then again, some governments have embraced the madness with support and open doors. China, Korea, Vietnam have locked things down, whereas Japan and Russia embrace the new capital markets, announcing new plans.

Others such as the UK have not yet declared their position, knowing eMoney Laws and Collective Investment Scheme Rules already provide a framework. Also, the FCA has set up a ‘sand box’ for various projects to test their propositions and then there is the USA who wants to exert influence across the globe when it comes to crypto, and like the UK provides a useful structure of exemptions covered by SAFT 506c.

All of the above furthering the debate, should crypto be Regulated, can it really be controlled and is Regulation just another attempt for the centralised Banking and Government to remove a threat to their supremacy. As a Libertarian I of course have some of these emotions, but I also want to stop the scammers, the idiots and the deceivers that are taking investment from people, the crowd with no intention of delivering anything.

99% of tokens are securities!

Founders who launched their token three or more months ago are now starting to worry, with parts of their anatomy churning and twitching.

Why? Because they are starting to realise they have issued a token that behaves like a security? That is, realising it is not a currency that greases transactions on a platform, or a voucher to earn or spend on the platform or loyalty rewards like air miles to be accumulated and use. Oh no…it is a security token then!

Hundreds of ICOs have indeed launched unauthorised financial products. Given that only a regulated or listed business can do this we have a BOOM situation!  But hey, six months or a year ago the world was different right? There were no rules on ICOs, right? Wrong again. Banking and payment rules have been there day one, but founders believed they were in crypto land where the rules didn’t apply.

Buffoonary from legal community

Poor legal advice was and remains another big issue for ICOs as many lawyers can only be described as delivering ‘buffoonary’ behaviour. They have wrongly advised founders and told them to add a disclaimer. You know the kind. How many white papers have you read where the disclaimer says “we are not issuing a security or financial product,” when they are doing just that?! And it is this kind of thing that makes the SEC, Swiss and other financial regulators create a list of ICO founders to speak with, especially those that have raised tens, if not hundreds of millions, of dollars in the ICO process.

There will be legal reprisals and finger pointing and some lawyers will have their ‘words’ tested and their liability insurances called upon. “This ICO is not offering a…

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