ICOs; The Problem and the Numbers

November 26, 2018 by Ramaa Mohan

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One of the major independent sectors that the cryptocurrency market and Blockchain industry spawned is the ICO sector. It provided people from the outside and the community alike a space to project their ideas and see if they would gather interest for them. A large portion of the ICO sector’s success comes from the fact

Instead, when the cryptocurrency market picked up, it provided people with a space and an alternative to the usual IPO route through the ICO setup. It allowed entrepreneurs to share and advertise their ideas and products and a space to incentivise funding. So the people who invested in ideas were people who believed in them and the people were also invariably the customers for whom the product was being built.

But as a sector that is part of the cryptocurrency market, the ICO sector has been the butt of a lot of criticism and harsh rules. In a lot of countries, the cryptocurrency market is banned because of the ICO side of the space and vice versa. This is because taking advantage of the anonymity that the cryptocurrency market and community provides, is something that people mastered and cheated their way into large sums of money, in the form of cryptocurrencies.

The Problem

The ICO market came as an alternative to the IPO method. It allowed users and customers to become investors, instead of having only venture capitalists in the investing game. It also allowed the entrepreneur to gauge the customer interest and requirements before the build, enabling them to modify their products accordingly and assuring success in the market, post-launch.

One of the major cruxes of the cryptocurrency market and community is anonymity. It assures absolute privacy and that is a feature that has been abused by many in the community. Especially in the ICO side of things, anonymity enabled a lot of people to promise false projects and products, raise funds for the same and disappear with it a couple of days later.

The number of these fraudulent ICOs are on the rise in spite of many regulatory bodies trying to curb the same. The ICO market has been one of the main targets of the SEC in the past as well.

The Numbers

With the cryptocurrency market pulling in a lot more attention than before, the ins and outs of the market and community are under the scanner. There are a lot of ongoing discussions regarding regulations for the market in parliaments across the globe. The cryptocurrency market became almost unignorable in December of 2017 after it reached its all-time high of $19,000 USD. The coin had showcased return percentages that have never been seen before and it became an investment everybody had to make.

With an increase of interest in the cryptocurrency market and a lot more people trying to get in, governments were forced to take a stance and decide which way they were going, in terms of regulations. When this happened, the ICO sector of the cryptocurrency market came under the scanner.

The SEC in this month conducted a major crackdown on startups that had conducted ICOs in the past two years and failed to deliver on the promises made at the time of the ICO. The US regulatory body ended up charging two startups for the same and for selling securities without registration. The two startups, namely Airfox, and Paragon Coin Inc, had to pay $250,000 USD for the same.

The SEC further added that the almost 85% of the ICOs conducted in the cryptocurrency market either failed to launch or disappeared from the public eye completely.

Similar numbers about the ICO sector were released by an exchange this week. BitMEX found from its research that more than 12 blockchain industry startups, who raised more than $50 million USD failed to launch their tokens or products in the past year. The BitMEX research ended up in a mailing list that named 12 big blockchain projects that have gathered quite a large amount of attention in the cryptocurrency market and still failed to deliver. The names include; Telegram and Filecoin.

These findings by the SEC, BitMEX and now various other exchanges industry-wide are leading the cryptocurrency market and the community to seriously rethink its ICO strategy. With the SEC on the ICO market’s tail, the market is prepping itself for huge changes in that sector.