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https://cryptoinfowatch.comGovernments Move to Regulate ICO.
Incentivized by the Bitcoin success, ICOs have become an all comers affair. Bitcoin price has hit a record high of $10,000 and is expected to climb higher before the end of the week. The cryptocurrency has beaten former records it has set even though it has always been in its own class. Despite the excitement this has generated among enthusiasts, there are concerns that the recent attention digital currencies have attracted has its downside.
The proliferation of ICOs has added impetus to the buzz in the industry. This has sequentially made investors aware of its potential as an asset despite the fact that many of the developers behind them have practically little to offer investors in terms of value.
The idea behind the concept ought be that developers have a good project but need to raise funds to execute them. However, what has mostly been the scenario is that a lot of these 'startups' have not done their homework well and should have no business launching initial coin offerings. Others joined the fray just because it has become a path to quick wealth.
Many companies that launched ICOs after the Ethereum foray were instant successes. Bancor for instance raised $153 million in 3 hours. This was unprecedented. The most optimistic enthusiasts of Blockchain commercialization would not have believed that such figures were possible in record time a couple of years ago. This no doubt was the motivation of many startups that embraced crypto-based crowdsales as a vehicle to fund their initiatives.
Despite many successes, it has been proven that there are many more that have failed or fallen short of expectations. Analysts report that as many as 80 out of 100 ICOs actually fail. The reason primarily is that this is an uncharted territory. Entrepreneurs and startups have been leveraging on the immense potentials of Blockchain to source needed funds for their projects. However, it is clear that there are many businesses who have launched initial coin offerings without legitimate products to back them up, nor the capacity to develop such.
Compounding the problem is a huge 'industry' of scammers who have taken advantage of the lack of regulatory activities to take advantage of the phenomenon. There have been instances in which millions of dollars have been raised in crowdsales and the project founders disappear with the funds. This has brought the need for regulation to the fore as governments make frantic efforts to protect investors. This seems to have been a race to balance the need for the safety of investor fund and that of protecting a new industry.
However, despite these efforts, the cryptocurrency space is still largely unregulated apparently because it is a novel concept. The activities of government agencies can at best be described as frenetic as evinced by somewhat unclear signals and proclamations by some government agents.
The Israeli regulators were reportedly debating the best approach to handling the ICO phenomena. It was hinted that plans were underway to ban crypto crowdsales in the country. However, this turned out to be false due to the fortunate happenstance that the country is startup friendly. Reports coming from a source close to the country's cryptocurrency community says that the country's regulators are working on a model similar to that adopted by Switzerland which has technically 'cleaned up' the ICO space after scammers and less credible companies 'invaded' the industry on the heels of successful token sales such as Bancor's.
The Chinese cryptocurrency community wasn't as lucky. The government cracked down on ICOs, cryptocurrencies and exchanges in September in what many analysts agreed was a necessary preemptive measure to give regulators ample time to assess the pros and cons of digital currencies on the economy. Prior to the ban, startups and digitally innovative companies had raised millions of dollars from ICOs in a rapidly growing Chinese digital currency market. There is a consensus that the intervention is temporary as the Chinese government has always been viewed as pro-innovation. The move to curb excesses was necessary to protect investors since observers noticed that as was observed in other places, more than 90 percent of the China based initial coin offerings failed.
The Blockchain community is aware that as long as this trend of having an all comers ICO continues, it could be calamitous because scammers already have leveraged on the melee. The earlier governments take stance on regulating the space, the better the digital currency industry evolves.
Japan, one of the countries that has taken a definite stance on the recognition of digital currencies still has misgivings about ICOs. CryptoCoinNews reported that Japanese regulators may not be favorably disposed to a blanket ban as in China. One Japanese regulator alluded that regulatory bodies were studying the trend to know what best approach to employ to ensure that the benefits were harnessed while eschewing the undesirable in the interest of the industry. The success of Bitcoin, Ethereum and many other coins whose developers had clear roadmaps has been accentuated by lack of concreteness in the projects of many companies behind most recent sales.
With speculations rife on regulatory measures, it is not yet clear what approach would likely be taken by regulators. The SEC for instance has been looked upon to make a statement expressing their stance. A lawyer informed about the commission's activities hinted that they are getting ready to roll out a set of rules to govern the crowdsales.
Views such as the one expressed by insiders point to the suspicion that initial coin offerings would cease to be all comers affair in the next few months as government agencies draft rules. Companies would have to readjust to create utility for their tokens to establish them as resources backed by value. This would ensure that those companies who have no business with ICOs are effectively sidelined.
Selling tokens is one thing, the token being backed by utility is another. That the internet and Blockchain operate in a virtual space should not imply that commercialization of innovations operating in cyberspace would end in abstractness. This is the message governments and their regulatory agencies are passing across to the industry. The digital currency community eagerly anticipate the results that would reify the abstractness most ICOs have become.
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