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One of the most innovative concepts to emerge from the blockchain during its short duration was the initial offer of coins, or ICOs. In this article, the author will discuss an emerging trend called "Initial Exchange Offerings" or IEOs. Reading about blockchain or cryptocurrency in any newspaper will allude to this unique type of public offering, which draws a parallel with its cousin IPO. An ICO is when a company issues token blockchain that it will sell in exchange for common cryptocurrencies like Bitcoin or Ethereum, which are more fungible.
The indistinguishable regulatory status of ICOs and their resulting tokens integrates the accessibility of the blockchain and is largely the reason why ICO works so well for fundraising. Companies that simply create an intelligent contract are already largely there and do not need to go through the same checkpoints as companies that choose to publicly quote on the major equity markets. This also means that the ICO market is full of fraud, as investors lack the protection of entities such as the SEC, which guarantees liability in these matters.
The statistics provide a rigid picture of this inclination to fraud, with 78% of ICOs have been identified as a scam according to a CoinDesk study. And the other 22%? To start with optimism, the numbers indicate that 15% of all Ico's has achieved success and registered their tokens in an exchange. The other 7% is made up of failed projects and those that "have become obscure" or have simply fallen off the map.
Therefore it has been important for the market of the cryptocurrency to regulate itself while the authorities decide the correct course of action and it may take some time if we consider that the proposed regulations are not the same in two different places. Meanwhile, self-regulation is achieved through transparency with people (forums), educational content that helps investors find the best opportunities, volunteer watchdogs and raising the level of minimum resources necessary for an ICO to be considered legitimate (with a whitepaper as a basis). It is still not enough.
Strengthen self-regulation, gently
Participants in the young ICO market are becoming more educated about how to discern a quality token, but 2019 will probably see regulators taking action to provide a clearer picture. Even among the G7 countries, the half measures implemented are divergent, so this clarity will be much appreciated. New ICOs are still in the process of being launched, but especially in places that they offer regulatory licenses with single jurisdiction such as Malta, Gibraltar or Estonia. However, the international reach of blockchain companies will be examined when the universal standards for ideas adjacent to ICO will be met, in the areas of taxation, anti-money laundering, know-your-customer, asset classification and more.
This is a move in the right direction on the one hand, as it indicates that the authorities consider the blockchain precious and want to present a unified structure for the global growth of small businesses. On the other hand, the measures taken so far do more harm than help. Since tokens are considered SEC titles, the original effectiveness of the ICO model has been decimated, although some legislators are trying to change this inviting the SEC to create a new asset class that allows blockchain flexibility. Stock lists encounter significant barriers that make it a very expensive proposition, such as commissions, never-ending documents, financial audits and other due diligence processes.
As we are also seeing in the emerging STO market, banking sector and financial sector, the blockchain infrastructure must first be built to make it easier for regulators to approve methods and processes, rather than individual projects. If an ICO-launchpad platform can get an approval stamp indicating that all projects projected forward are compliant, then the dead market will be easily revived.
Presentation of the IEO
IEO, or Initial Exchange Offerings, is a new blockchain initiative that provides a transparent and compliant framework for an ICO and can "To revive" the trend simply defining it better. ICOs are unique to blockchain and can not be compared to other blockchain products such as security tokens, currencies, non-fungibles or utility coins, so a model will do a lot to reduce their variability. Consider that the economy and security of a tokenized economy are applied by individual programmers of unpredictable skills, and it's no wonder that so many smart contracts are being violated.
Instead of hiring developers and bootstraps, an ambitious startup blockchain can delegate the fundraising process to a reliable exchange. The exchange will complete all due diligence activities with its greater resources and experience and can reduce phishing, DDoS and other malicious attacks that target small transactions more effectively. In addition, the spread of tokens, fundraising and financial audits can take place with exchange resources and are supported by teams trained in the financial sector.
This benefits investors, who can correctly assume that an ICO will be safe based on the completion of the IEO. It also helps the project, which can do without the base and the volume of exchanges, but also the exchange, which advances these metrics through the hosting of new tokens. Many jurisdictions are already pursuing this new methodology, but the least surprising is China, which imposed a total ban on ICOs in 2017. CoinBene, a Chinese stock exchange, is overseeing the first IEO of Temco-A promising supply chain and logistics platform, which can also boast its status as the first ICO ever launched via Bitcoin blockchain and not by Ethereum thanks to RootStock (RSK).
Investors in Temco and other IEOs on CoinBene can consider them differently than other symbolic opportunities, since CoinBene has injected a real responsibility into the process. With the IEOs on the bridge to help the nascent mature market, it will become more apparent that the slow pace of regulators is simply giving more time to the blockchain because it solves its problems – and this is perhaps the most optimistic idea ever.
Images from Shutterstock.
