Coinbase goes to Asia: New IEO platform
China’s late 2017 ICO ban left crypto startups in the country trying to find alternative solutions to raise funds for their projects. Projects started to discover the new trend of Initial Exchange Offerings (IEOs). This innovation allowed them to perform their fundraising with no fear of the law or the authorities.
An increasing number of cryptocurrency exchanges have started to embrace IEOs. One of the first in line was Binance, which launched its IEO platform Binance Launchpad. In January, BitTorrent – that was bought by TRON – initiated a token sale on Binance Launchpad and raised $7.2 million in less than 15 minutes, hitting the crowdsale hardcap. While 15 minutes to sell all tokens in a crowdsale is better than anything a crypto startup can dream of, a token issuer on the Binance Launchpad established an even better record. The second IEO on the cryptocurrency exchange’s platform, Fetch.AI, hit the hard cap of $6 million in just 22 seconds. After observing the success of Binance Launchpad, other notable exchanges announced launches of their own IEO platforms. Among the IEO platforms are Bitmax Launchpad, Bittrex IEO, OK Jumpstart (OKEx), KuCoin Spotlight, and Huobi Prime.
And now Coinbase is considering launching an initial exchange offering (IEO) platform in Asia. This would allow it to launch and broker “a proprietary exchange token” and other tokens in the region, Coindesk reports.
The crypto trading platform’s possible plans were announced this week by Kayvon Pirestani, head of institutional sales for Coinbase in Asia, as he spoke on a panel Invest: Asia conference in Singapore about the current state of cryptocurrency capital formation.
“We think there’s a really interesting opportunity there for Coinbase,” Pirestani said. “In a nutshell, Coinbase is carefully exploring not only the IEO space but also STOs [security token offerings]. But I can’t make any formal announcements right now.”
Since the crypto boom of 2017 and subsequent bust in 2018, initial coin offerings have largely fallen out of favour as numerous firms that conducted ICOs have been compelled by the SEC and other regulators to pay fines or return capital to investors.
ICO’s were very lucrative for the platforms listing them at the time, and the urge is still there.
Major exchanges reportedly charged fees of up to half-a-million dollars USD from ICO purveyors for the right to a prime listing, and then went on to collect profitable fees on trades.
It is through this lucrative combination that Binance founder Changpeng Zhao, for instance, became a billionaire in less than a year after opening his platform, thanks in part to the exchange’s fortuitous launch in the midst of the boom.
But circumstances have become much leaner in the past year-and-a-half as investors become more cautious, rules tighten and compliance costs escalate.
Exchanges have attempted to keep the money coming in by offering to help startups conduct “IEO” token sales directly through the platform, often at a fee. In exchange, the platform has promised to “curate” investment opportunities for investors while helping projects with KYC/AML.
Major crypto trading platforms Bitfinex, Binance, OKEx, and KuCoin have already launched IEO programs.
Issuers and investors still appear to be bearing most of the risk in the new normal of crypto capital formation.
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In 2018, ICOs raised nearly $8 billion. But as many know too well, the ICO wave has since come crashing down. ICOs now raise about 58 times less than they did just a little more than one year ago.