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Cryptocurrency World

Everyone paying slight attention to financial news are all well-aware of the meteoric rise of the cryptocurrency phenomenon and how all key players are reacting to this new event.  Below is a high-level view of the current events to better understand this:

ICO at-a-glance

An ICO, or initial coin offering, offers a chance to make big money quickly by getting in on the next new money, similar to an IPO in capital markets. The rise of ICOs has prompted responses from regulators for example, the SEC  cautions investors and startups. China took another approach and banned ICOs altogether this year.

ICO objective

To raise money for new ventures that dabble in cryptocurrency technologies such as Bitcoin and Ethereum.  An ICO enables startups to utilize a process which is comparable to a Kickstarter campaign and skipped the venture capital methodology. Those putting up the money get access to technology companies that are usually restricted to the reach of only institutional or high-income investors. Additionally the period to cash in can be significantly shorter for investors, assuming the demands are there for the cryptocurrency in scope.

ICOs volume

There had been 46 in 2016 and 140 in 2017 through September.  SEC issued warning in July causing a slow reduction in ICOs, according to  Approximately 50% of the money raised in ICOs had gone to the 10 largest ventures.  For example, Filecoin, a data storage network raised $257 million.  Tezos which has developed its own secure blockchain infrastructure managed to raise $232 million.

Digital currencies functions

Primarily used as medium of exchange within an application.

ICO investors incentive

Unlike IPO investors who get in from the ground floor with newly publicly traded companies thereby reaping rewards via equity appreciations and cash flows, ICO investors get virtual credits, which can be defined as different things in different ICOs.  Capital gains can be expected if the demand for the virtual credits.

SEC opinion

It warned of the potential for fraud, scams and hacking.

SEC action

The SEC intends to treat some ICOs as IPOs, with all the registration requirements that typically accompanied a standard IPO process.  An exemption clause was included but the clear definition of this has yet to be fully defined by the SEC.

Published inFintech

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