The initial coin offering (ICO) market is snowballing, with 537 ICOs and $13.7 billion in funds closing successfully in the first five months of 2018. According to Consultancy UK’s article published on September 17, 2018, the ICO market’s boom is a result of more explicit regulation in some jurisdictions, which has helped the new fundraising approach reach maturity and become an accepted means to raise money.
ICOs Are Becoming More Popular Overtime
ICOs have grown in popularity over time with the first ICO occurring in 2013, with only two projects taking place in the year. The number quadrupled to eight launchings in 2014, which raised a total of $30 million. Fast forward to 2018, and ICOs have gained significant momentum boasting a total amount raised of $4 billion globally. The funding mechanism has emerged as a new alternative type of crowdfunding and capital raising among blockchain-related companies.
A hybrid approach of combining venture capital (VC) funding and ICOs is also emerging as a valid funding alternative. As the concern and skepticism of criminality in the ICO sector persist, taking on the dual approach may be a novel route to ensure that the projects being funded are not scams.
U.S., Singapore, and the U.K. Are Leading the ICO Movement
The U.S., Singapore, and the U.K. are currently leading the world when it comes to ICOs in volume. They have closed over 157 successful ICOs with another 153 ICOs planned before the end of 2018.
The U.S. has become a leading ICO country due to its clear and firm regulatory requirements. Its implementation of Know Your Customer (KYC) and Anti-Money Laundering (AML) requirements has provided a clearer framework and paradigm for companies in The United States. The U.K. has also experienced a jump in volume and value with funds raised sitting at $507 million, while Singapore has raised $1.1 billion via ICOs.
While the three nations are leading in regards to volume, the British Virgin Islands which hosted Telegram’s $1.7 billion ICO, and Cayman islands, hosting EOS’s $4.1 billion ICO were the countries that hosted the largest ICOs.
ICOs Face Inconsistent Global Regulation
Unfortunately, ICOs are often are defined very differently and take on various forms depending on where they take place in the world. The differences revolve around utility tokens, securities, or digital currency depending on the country and jurisdiction.
The lack of clarity limits the ICO market’s ability to grow and mature and can thus become a breeding ground for fraudsters and hackers. As a result, many retail investors have fallen vulnerable to hacks and scams. Consultancy U.K. noted that ten percent of the $4 billion raised had been lost to hackers.
For the ICO market to grow, it needs to address the growing concern of inconsistent legislation. More precise, stronger, and more consistent regulations can lead to greater development of the cryptocurrency, blockchain and related industries.