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The UAE Securities and Commodities Authority has approved Initial Coin Offerings as securities and will cooperate with the Abu Dhabi and Dubai stock exchanges to develop trading platforms for ICOs, with the intention of introducing regulations by mid-2019 .
Let's have a look at what ICOs are.
What are ICOs?
ICOs are the cryptocurrency industry version of an initial public offering (IPO), in which companies become public and sell shares to individual investors. With ICOs, investors buy cryptocurrency units, obtaining tokens instead of shares.
ICOs can be a source of capital for start-ups or small and medium-sized businesses, usually through crowdfunding investments. Companies can issue cryptocurrency or crypto-token to investors, in the same way that shares are issued in an IPO of equity. The first cryptocurrency distributed by an ICO was Ripple in 2013.
How does it work?
Investors are offered units of a new cryptocurrency purchased via cryptocurrencies like Bitcoin or Ethereum. So far, most ICOs have been used to finance the development of new cryptocurrencies.
Who helps?
ICOs offer a new way of crowdfunding, in addition to Internet-based platforms such as Kickstarter or fund-raising venture capital, to small and medium-sized businesses. ICO raised $ 3.3 billion (Dh12bn) for 412 projects in the first quarter of 2018, according to ICO Rating, a global rating agency for the ICO market. However, only half of the ICO projects were able to raise over $ 100,000.
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What are the UAE doing with ICO?
Dubai-based technology company Avanza Innovations has already announced that it intends to open operations in the Nordic countries and the Far East by issuing an ICO in the first quarter of 2019 to raise funds for its expansion.
The initiative of the Securities and Raw Materials Authority to regulate ICOs has added an expanding list of global regulators who have decided to standardize ICOs and cryptocurrencies.
The Japanese financial services agency is examining cryptocurrency trade before registration to ensure that it does not represent an exceptional risk compared to other investment vehicles. The Department of Financial Services of the State of New York is issuing BitLicense for companies that intend to operate in virtual currencies. The European Union has brought crypto-currency exchanges and custody portfolios under the umbrella of anti-money laundering rules.
Updated: December 20, 2018 04:39 PM
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