ICO, Initial Coin Offering, is the newest fundraising tool on the block for tech start-ups. Some are already raising capital by issuing and selling their own cryptocurrency to the public, also known as digital tokens. Currently, the self-regulated market is on the rise, and stands to challenge and disrupt venture capital as we enter 2018. Some are coining this a digital goldrush, not seen since the dotcom boom, which begs the question whether these tokens are deemed securities.
For Temple Melville, founder of Scotcoin, Scotland’s own digital currency, ICOs are the “go-to” method at the moment for blockchain and fintech companies to raise funds for their ecosystem. Scotcoin was one of the earliest adopters of the view that cryptocurrencies would be regulated, which is why it is working towards being ‘know your customer’ (KYC) and ‘anti-money laundering’ (AML)-compliant.
“It is no surprise that countries as diverse as India, the United States, China and so on are discussing and promulgating regulations to cover what is presently ungoverned. Now the Singapore Monetary Authority, one of the most respected in the world, has turned towards ICOs,” says Melville, in response to Singapore’s bid to regulate this new industry in August this year.
“They are careful to draw a line between ordinary cryptocurrencies, and the wilder ICOs. We are almost at the South Sea Bubble moment of ‘to undertake an endeavour, the knowledge of which shall not be divulged,’ where money was raised for something no one had any idea of,” he adds. “Their warnings are about ‘foreign and online operators’, ‘sellers without a proven track record’, ‘insufficient secondary market liquidity’, ‘highly speculative investments’, ‘investments promising high returns’, and ‘money laundering and terrorist funding’.”
According to Melville, all of these concerns are valid to an extent. “In essence, anyone can launch an ICO, and we know greedy, gullible people will put money into things to make a fast buck. You only need to think of One Coin, which has hoovered up millions in a giant Ponzi scheme. And it isn’t even a crypto currency as it sits on no blockchain.”
Tokens took off in 2017 with over 1,000 ICOs raising on average $20 million, and over $250 million in some cases. Most of them were based on funding ideas and open IP rather than equity, which is a whole new type of early-stage funding. Some experts expect ICOs to take its place alongside more established forms of fundraising like crowdfunding and venture capital, bubble or not.
“The world of blockchain technology has taken a dive into the mainstream with growing interest worldwide in cryptocurrencies such as Bitcoin, Ethereum and Ripple to name a few,” says Richtopia founder, Derin Cag. In August, Impak Finance, a Canadian impact investment firm launched the first ever fully-regulated cryptocurrency token. “This is history in the making,” he adds.
Impak Finance launched an ICO, having already raised £300,000 of Impak Coin, the first fully-compliant cryptocurrency dedicated to growing the impact economy.
“Canada is among the central hubs witnessing a boom in blockchain technology related start-ups, both by leading social entrepreneurs like Paul Allard and world-class businessmen such as Don Tapscott,” he adds. “Impak is using capitalism and technology as a force for good to create social impact on a global scale. The impact economy is substantial and growing rapidly.”
According to statistics by the World Economic Forum, it is estimated to reach somewhere between £250 billion to £1 trillion globally by 2020.
Impak Finance is building an online ecosystem bringing citizens, businesses and investors together both digitally and face to face to grow an economy based on social values. To accelerate the development of this transformation, they have launched Impak Coin (MPK), which Cagg believes sets an example for ICO regulators across the globe by using a crowdfunding model which took them more than six months of academic research and compliance advice to protect participants.
In addition to their coin, Impak Finance has produced a detailed proposal to create the first ever chartered bank in Canada committed to the Impact Economy.
“Blockchain technology is playing a pivotal role in this process and Impak Finance will be positioned at the focal point of this emerging biosphere, acting as a catalyst of the United Nation’s Sustainable Development Goals, alongside exciting startups such as Humaniq and Richtopia,” he adds.