Dusty Old ICOs: Did They Pass Away?
After booming of the Bitcoin – one type of cryptocurrency-, ICO became popular and dangerous. They have largely lost their popularity over the past year or so, mainly because they have served to do more harm than good in the cryptocurrency space. While initially believed to be a solid method for garnering startup capital, many companies and individuals have abused the privileges that come with ICOs, Lack of regulation on the matter increases risk of fraud. Since virtual or crypto currencies have no legal and binding definition, governments have different approaches on the issuance and trading of such virtual currencies.
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.
Japan accepts virtual money as money and has a set of rules applicable for ICO. USA on the other hand, classifies cryptocurrencies under commodity/funds, or as a type of “digital asset securities” regulated by Securities and Exchange Commission (SEC). ICO is restricted by China in its territory in order to prevent fraud and anti- money laundering. On the opposite side, ICO is supported by Malta. Maltese government announced that Malta will provide ICO investors with incentives and tax advantages. Additionally the government announced that crypto exchange market will be safe since the offshore accounts are not allowed within the territory of Malta Island.
Another ICO supportive country is Switzerland that established crypto-valley. At the same time, due to positive approach of Swiss government, Swiss Financial Market Supervisory Authority (FINMA) published a guideline on cryptocurrencies and ICO. Many times, people use ICOs as a way of earning money for their businesses. People pledge Ethereum (ETH) or ETH-based tokens in return for a new cryptocurrency that will inherently give them access to the new company’s goods and services. It should be a simple trade of sorts, but it doesn’t always work out that way.
Sometimes, ICOs are fraudulent from the start, where people orchestrating them garner a certain amount and then take off with the funds they’ve earned, as it was never their plan to start a company of any kind.
Otherwise, these ICOs work for a time, but the companies they’re meant to fund ultimately fail within their first six months. The businesses close their doors permanently, but the people who invested in the companies are left with empty pockets, bruised pride and a lot of coins that are now completely useless.
Hence, the risks involved with ICOs have become far too great for some countries to handle.
In the midst of such an atmosphere, the STO emerged. So far, the nascent industry has featured 64 STOs which raised an accumulative total of $1 billion. In Q1 of 2019 alone, STOs saw a 130% increase.
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