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Could someone explain to me how ICO's are different from crowdfunding? Why would it be regulated differently?

I have not posted here before, so maybe no one will reply, but I'm still trying to wrap my mind around why China's decision to ban ICO's had such a huge impact on the value of cryptocurrency in general. Seems unrelated in a sense...I am a huge believer in what bitcoin can offer...are ICO's undermining that effort?

It seems unrelated because it most likely is. To be honest, I don't think China's ICO statement was the cause of the current dip. It's only natural that a correction would occur after a new ATH, especially with a psychological barrier such as USD 5000,-. People always try to find an explanation after the fact and sometimes occurrences such as China's ICO statement simply seem to fit.

Thanks for the reply! Your explanation makes more sense than the articles I read on the subject.

Simply, ICOs allow "investing" and "crowdfunding" without having
to report personal identification or going through legal compliance
systems like KYC/AML, and you are provided a token as a proof of
purchase, thus it is an "illegal security" asset.

When a legally regulated company uses ICOs in order to get capital,
it will only occur for three reasons: (1) that company is stupid and
their CEOs and lawyers have advised them improperly, or (2) that
company is a scam that will eventually run away with the money,
or (3) that company is a front to help launder either ill gotten
cryptocurrencies or dirty money, which will likely also scam
and disappear one day.

In most countries, an ICO token would be interpreted to be a
"security". Any altcoin, can transform into an ICO, when it is
created or directly associated with a legal organization and its
funding (and the corps business is not the token or the chain).
Companies are not allowed to create "securities" without the
oversight and approval by their government's financial
regulators. This is very well known and people who
are shocked by this action (in China now, and the future
actions that are to come in other places) shows blatant
ignorance of the law and how it functions. ICOs are not
the same as Bitcoin and can not function as such.

In theory, there is no valid purpose for ICOs except for legally
regulated companies to violate the law, which is clearly asinine.
A regulated ICO is an oxymoron and in practice is impossible to
guarantee full compliance. So, it is simpler to make ICOs illegal
for businesses, than to attempt to regulate them, since they by
design, facilitate no other function than noncompliance.

IMO, ICOs are only beneficial for the funding and creation of
illegal markets or illegal software. Of course, when this occurs,
majority of those project will be scams as well, but at least
those ICOs are not legal oxymorons like today's version.

Edit: typos

You're correct in that it is unrelated (or at least only indirectly related). Crowdfunding and offering securities has nothing inherently to do with cryptocurrency.

Here's the thing: the ICO "bubble" has been front-and-center this year. People need to buy ETH (and in some cases BTC) in order to participate in ICOs. Furthermore, much of the funds raised are then held in cryptocurrencies rather than fiat currencies, which helps to drive the price of BTC and ETH upwards.

So, from a fundamental perspective, if you believe that ICO investment was driving BTC and ETH investment, then this throws a wrench into that process.

Thank you all! This is great insight. Much better than the info I get from the news.

In view of the initial coin bargains super fruitful (ICO) from organizations including Iconomy, DTV Singular, First Blood and Decent, it is very certain that the group bolsters crowdsale cryptocurrency token of new companies based private Blockchain.

Notwithstanding, the whole system presale on cryptocurrency has pulled in feedback from specialists, which raises a great deal of persuading contentions against the authenticity of the ICO.

Every startup Blockchain can participate in ICO, even with some code scraps or shallow depiction of their administrations. The straightforward thought behind crowdfunding no product or framework has turned into a pattern in the business cryptographic money, with privately owned businesses/private segment to raise a huge number of dollars to fund their operations.

I quite agree that they are different but the issue if China not regulating crowd funding does not mean they  won't because looking at the report lay emphasis more on companies coming first time for funds and that's what ICOs is all about compared to crowd funding which is about existing business and more common for gambling sites. Maybe when that alone is starting to being exploited, then regulation is possible.

It would seem ICOs are specifically referring to crypto currencies or tokens offered in exchange for crowdfunding, while crowdfunding in itself is just raising money with a crowd. there has ben crowdfunding for a while now; observe gofundme and indygogo. but they werent offering a token or coin, essentially a security, with an expectation of profit. why else would anyone invest in these? i love some of these ideas, but i would never just "donate' money. if its a company, i would invest by buying shares. these icos are essentially issuing stocks in the majority of cases; of course this was going to be regulated eventually. the laws for legitimate securities are draconian.

welcome to the board ;) stay a while, its fun here.

Initial Coin Offering (ICO) is almost similar to crowdfunding...I think the big difference is that when we are talking about ICO we mostly linked it to projects in the cryptocurrency sphere while crowdfunding can be any project that is looking for source of capital usually coming from small investors. There had been many crowdfunding platforms that became famous like IndieGoGo...I think those are actually predecessor of the ICO platform (though some may not agree with me on this comparison).

The main difference between crowdfunding platforms such as IndieGoGo / Kickstarter and ICOs is that ICOs are offering part of the profits (in one way or another), while IndieGoGo / Kickstarter campaigns are more of a way to provide earlier, cheaper access to promising new products. ICOs try to raise money by issuing tokens that are in most cases akin to securities while IndieGoGo / Kickstarter campaigns try to raise money be doing pre-sales of their product.

In short, ICOs are a crowdfunded mixture of venture capital and IPOs, which is also why the SEC and China got involved.

ICO is different from crowdfunding or IPO.

Crowdfunding or IPOs are regulated by most countries which impose restrictions on who is allowed to fund or how much they are allowed to contribute.
ICO is unregulated. It was born to bypass the regulations. People can invest as much as they want. Everyone can raise money by issuing cryptocurrency. There is no need to have developed products. The only you need is ideas. And you can raise more money than Crowdfunding. Investors  often don’t have any right to the company. So there is no protection. It is often considered as a crowdsales (their products are coins. So for tax purpose, they will be taxed, proceeds from IPO are not taxed).

In my opinion, most of ICOs are scams. Their projects will die eventually (although there are many promising projects out there)

I don't like IC0s....its a waste of peoples time and money

Your thinking is absolutely wrong i think.Because is ICO is very important for newbie in this forum because a newbie member is does not all about this forum.ICO is my favourite.

Wow. What a horrid outlook.

ICOs allow autonomy of money. They allow decentralized participation.

The average person can get in on an ICO, the same way they can go to a casino. Where as securities require archaic framework, muddled with endless corruption, short sellers, etc. You may not even be able to buy into them, depending on who you are and who they are, and it'll cost you money.

An ICO also allows funding without a change in ownership. Unlike a traditional security where public stock offerings may kill the company under new ownership, thereby screwing the small investor, an ICO doesn't relinquish control to penny pushers. Another way to see them is they allows the mission statement to continue without intervention.

IMO ICOs are amazing, many of their attributes will be found in the future of investing.

I Authenticate
It is not horrid, it is how the law functions.
You have two choices here: either comply or circumvent.

ICOs can not be decentralized and are actually rings of centralization
upon each other. Depending on your parent system, all ICO dependents
could be voided or outright destroyed.

Casinos are majority of the time regulated and when you deposit or
withdraw, you are forced to comply with their KYC/AML. So, ICOs are
not like Casinos in anyway, unless you are taking about unregulated
or illegal casinos.

Your personal beliefs on how "securities" function and the barriers
to entry are irrelevant. Security devices were created to be regulated
for human protection from human exploitation. Whether the current
system is an efficient one, is irrelevant. The original purpose was
protection from those who are destructive to the larger system.
ICOs, as they currently exist, are destructive to different systems
and do not provide any benefit to the world, accept maybe as to
revealing new loopholes that governments will eventually patch,
since it is possible to patch and enforce against such a weak device.
In most ways, ICOs are worse than Shitcoins.




This is irrelevant since ownership does not exist in ICOs, nor in
properly functioning blockchain systems. If you claim you have
ownership, it is only because your human government has
granted you those rights, like with legitimate securities. ICOs are
illegal and unregistered financial devices, designed to exploit the
system so that human exploitation could be performed with very
high gains.

When you combine "legally complying entities" WITH an "illegal
circumvention devices", and argue that it has valid aspects, to
my understanding, that is comparable to saying "murder is beneficial".
It could be argued that murder is a more efficient and natural way
for humans to acquiring assets or property, when compared to
doing such through burdensome and numerous hurdles of the
governmental regulation systems. The laws exist to prevent
actions that you are either aware of or not, and whether you will
perform or not. What is burdensome to you as a normal user,
is preventive to another who is an normal attacker. ICOs allow
normal attackers to perform exploitation upon the normal users.
Regulation of ICOs can never stop exploitation in the same manner
that regulated securities currently do, so it will be outlawed for
legal entities to use.

The reality is that ICOs will likely not survive into the future
because they circumvent while being created by legal entities that
are forced to comply. This contradiction is laughable and means
either two things: either stupidity or outright scam. These tokens
and their controllers are ripe for enforcement and their time will
come since they are all ignorant or willful. The governments
and laws profit most from human ignorance. If humans always
complied and were knowledgeable, governments would serve no
purpose. The reality is that your current programming prevents
you from taking appropriate actions and thus needs human
governance to protect you from others, and others from you.

Danger Close ICO No Play
Roger Roger

So it seems that ICO's are controversial and will inevitably be scrutinized by governments and the media. Does anyone have thoughts on how this will impact crypocurrency in general? It seems to me that the ultimate goal for cyrpocurrency is to get more mainstream, and more accessible- which was happening until the news out of China. If the international conversation turns to ICOs and regulations, do you think this will stall progress overall?

I think it'll take a major player to come in and set the trend. Right now it seems as if a good amount of countries are too unfamiliar, so they default to just not allowing it. But then you have places like Switzerland who have issued blockchain passports. Maybe if the US or China chooses to somehow implement and regulate, ICO's will be allowed again. With cryptocurrencies, it can be hard to regulate if people don't cash out. Great insight on this thread.

ICO's are great, but the government will always want a piece of the pie. Except this pie has a barrier of entry. I'm interested to see how the next few years will look like with crypto, blockchain tech, and just the sheer amount of governments competing to be the first to implement.

ICO's are great, but the problem I see int he future is that there will be so many. Decentralized currency is great, but there has to be a few ICO's that become the standard.

ICO's crowdfund to exchange. You buy tokens from ICO's to be used and exchanged at a later date.

ICO is different from crowdfunding or IPO.

Crowdfunding or IPOs are regulated by most countries which impose restrictions on who is allowed to fund or how much they are allowed to contribute.
ICO is unregulated. It was born to bypass the regulations. People can invest as much as they want. Everyone can raise money by issuing cryptocurrency. There is no need to have developed products. The only you need is ideas. And you can raise more money than Crowdfunding. Investors  often don’t have any right to the company. So there is no protection. It is often considered as a crowdsales (their products are coins. So for tax purpose, they will be taxed, proceeds from IPO are not taxed).

The first Icos have done very well, no longer like the old icos,many of them just come out as frauds and then disappear now.

Crowdfunding is the process of funding a project or idea by raising many small amounts of money from a large number of people usually by internet.

ICO is an unregulated way by which funds are raised for a new crypto currency venture. An Initial Coin Offering is used by developers to bypass the rigorous and regulated capital-raising for their desired project usually it is made by selling their token or coin's idea to the customer for a certain amount.

So itis safe to say that ICO is a type of crowdfunding.

Of course it's the same thing. With the exception of those projects which receive grant funding through crowdfunding. When investing in ICO each user has a hope that he will profit from the project. Other differences between ICO and crowdfunding I don't see.

The main difference between ICOs and crowdfunding is regulations. ICO is unregulated way to raise funds whereas crowdfunding is regulated. This keeps ICO off from hassle and also leads to lots of scam. Most investors here in cryptocurrency sphere want ICO to be regulated as well. I feel ICOs will get regulated soon because of increase in number of scam attempts. Countries would either be banning ICOs or be regulating it in near future.

Crowdfunding projects are usually projects where you do not expect a return of your investment as these are solely used to raise money to either release a new product.

ICOs however are treated as investment, as these usually will give out tokens or coins as a form of currency or a share. This is also the reason why it is heavily regulated in some areas.

ICOs are for the cryptomarket mostly and have no restrictions. Anyone can invest however much they want, from any location on the planet. Crowdfunding is however regulated and there are people who cannot invest however much they believe in the project.

There are two major differences which clearly differenciate crowdfunding from ICOs .  In ICOs , there is a generation and issuance of their own tokens and the developers take the help of other wallets such as ECR-20 wallets and waves wallets etc to access and trade their tokens . They basically have to promote their coins and also tend to take some donations in the name of pre-ICO . The value of the coin is not known to anyone before the ICO . It all depends up on the success of the ICO . Whereas , crowdfunding such as Indiegogo is a crowd of people raising funds collectively to get some mutual profit from a product. The value of the crowdfunding is known before hand and the investors have a pretty good idea of the outcomes.

Why Crowdfunding does not offer the teaching benefits? There are a variety of projects. But all of these projects have clear project documentation. There is a certain amount needed to run this project and there are specific percentages that will be distributed among the depositors. ICO is a similar project but totally outside the control of investors.

The term of ICO was just catchy as it resembles to IPO but it has almost nothing in common, mainly in the legal aspect.

ICOs means crowdfunding or better say,  it is one way of crowdfunding.
The most important thing ICO and crowdfunding have in common, is he fact that the tokens (or the project) may NOT exists at the end of the sale.

In an IPO there is a bid for shares of an already existing company or business how you want to name it.
In an ICO the bid if for tokens of arbitrary value which might not even be issued and certainly don't go through the SEC approval process.


Yeah, people investing in tokens do that out of goodwill.
And you're mistaken about the second part.
Also add one thing. In most crowdfunding if the value is not reached the money are sent back , in ICO.....can I laugh?

Excerpt from: https://coins.newbium.com/post/3206-crowdfunding-vs-ico-confront-the-expert-legitimacy

One major difference between traditional methods of crowdfunding and ICO, is the market value. When a product is introduced on crowdfunding platforms like Indiegogo, investors and buyers aware of exactly what to expect when the product was complete.


            For example, when the smart Pebble start their crowdfunding campaign, the investor can immediately find out whether the product is worth the amount of money by comparing other people's products on the market.


            In contrast, almost impossible to predict the outcome of the ICO, especially if users are not fully aware of what they can expect. ICO itself is not based on market value in the real world, thus making it vulnerable to substantial under or overvaluation of assets.