Regulatory regime for initial coin offering on the cards
The federal government is considering regulating initial coin offerings, a niche form of private fundraising for the technologically sophisticated developer community, in a move that could give blockchain-based start-ups an alternative to traditional capital raising.
With ICOs around the world largely unregulated, they are considered the “wild west” of capital markets where scams and fraud are rife. But a growing list of global regulators and governments consider regulation could bring advantages, including providing a faster, lower-cost form of fundraising – an alternative to initial public offerings, venture capital, crowdfunding or bank loans – for entrepreneurs wanting to retain full equity in their start-ups.
Unlike an IPO or venture capital raising, which involves selling ownership in a company, an ICO allows a business to pre-sell rights to a particular product or participation in a service. The raisings are typically conducted over blockchain technology and involve the issuance of a digital “token” paid for in a cryptocurrency such as bitcoin. Many ICO tokens can be traded in secondary markets, providing investors with immediate liquidity.
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