ICO Regulation


Terms like ICOs, blockchain and crypto are coming up more and more in compliance conversation. While it may be some time before regulators catch up with technology, investing in crypto is growing in popularity. and Compliance Officers are taking notice.

Read the following post for an update on ICOs and the basics that Compliance professionals should know. 

Initial Coin Offerings

ICOs (initial coin offerings) are a means of raising capital. With an ICO, investors get tokens and only a finite amount of tokens are released. If that company begins to grow in value, these tokens too become more valuable. More than $21 billion has been invested in ICOs in 2018, an increase of 228% from 2017's total. (source).

The market for ICOs is largely unregulated, making vulnerable for use in ponzi schemes, pump and dump schemes, money laundering and other fraudulent means. A study by Statis Group found that more than 80 percent of ICOs conducted in 2017 were identified as scams. (source).

ICO's - The Regulators Response

The popularity of ICOs erupted in 2017. As more and more money got pumped into this form of financing, it forced regulators to sit up and take notice. One of the first actions regulators took was to issue guidelines to try to warn and protect investors. The Securities and Exchange Commission (SEC) released a set of guidelines in July 2017 (source). They likened the raising of capital via ICOs to the sale of securities and called for companies to register with the SEC before releasing an ICO.

In our next post, we look at the reaction from regulators across the globe. Subscribe to our blog.

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