The crypto-winter left the future of initial coin offerings uncertain. In the run up to 2018, ICOs dominated the cryptocurrency news – as new, eager investors sank money into any project that used blockchain as a platform. While the blockbusting ICO fundraisers may be over for the moment, the amount of money flowing into new cryptocurrency projects is up over two years. The continued expansion of the cryptocurrency industry seems to have made up for the contraction in direct funding.
In fact, the second quarter of 2018 showed an interesting statistic – ICOs nearly matched traditional IPOs for fundraising. In part, this is due to the relaxed regulatory environment around ICOs. It continues to be easier for an ICO to fundraise than a traditional public offering. Governmental regulations put strict conditions on when and how an IPO can be constructed – particularly when compared against the complete chaos of cryptocurrency legislation.
The Entrance of Traditional Investment
Despite the lack of a government safety net, traditional financial institutions and hedge funds are beginning to look at the ICO market. The growing legitimacy of the blockchain industry assuaged fears of volatility and exit scamming. Meanwhile, the unprecedented profit potential is extremely attractive to those looking to grow their portfolio value.
A recently conducted survey by PollRight showed that 41% of institutional investment services believe that they will invest in ICOs within the next five years. Considering the speed and scale at which blockchain is growing, this number may be surprisingly conservative. It does not take into account the number of companies that currently have no intention of investing – but will likely end up getting involved over the course of the next five years. After all, JP Morgan Chase remained a public detractor of both blockchain and cryptocurrency – right up until they released their own coin and technology.
New SEC Guidelines May Hamper ICO Development
The Securities & Exchange Commission of the United States recently released a new set of guidelines for ICOs. The guidelines are another attempt to create a framework for the cryptocurbrency industry – despite a continued avoidance to pass any actual legislation. While the SEC is granted the power to handle many aspects related to cryptocurrencies, the lack of true laws is a stifling factor to the US crypto industry.
The guidelines explain the intricacies of ICO investing – including what does, and does not, count as a security. Further, they explain the inherently global nature of ICOs and the volatility and dangers involved with the cryptocurrency market. Ultimately, the guidelines are aimed at accredited investors – as ICO investment remains mostly unavailable for the average American investor.
Article By: Adam Stone