Should ICOs be regulated as IPOs?

[Candyflipboy]

For sure! There plenty of ICOs which has any chance to bring an investor profit. The only aim for them — collect first money of believers and disappear.

[aoihs00]

Surely there should be difference between the ICO projects which used to be launched like hippie. No regulations nothing, just anyone can come to the market with so called bright ideas and can start up the ICO to raise those million of dollars. I'm sure changing this with some regulation applied on them will benefit us and nobody.

[beachbummer]

I think it should be handled in two ways. If the ICO targets general public then it should be regulated. If the ICO chooses to avoid regulation, then it should have a set of disclaimers and be offered only to accredited or sophisticated investors.

The method to determine sophistication or accreditation will be a whole new other topic..

[ludovicvuillier]

Right now it's not regulated, but diligence checks by individual investors plays apart too. So I suggest investors have to do their diligent checks and research before every ICO they plan to invest in.

Some of the Due Diligence done by a regulation committee is way above and beyond what a private individual can do.

[ludovicvuillier]

ICOs have become quite popular to bypass rigourous processes put in place by institutions for startups to raise money and thus finance their activity/project.

However, with no consensus on their legal status and the regulation that should apply, many countries and their institutions are advising people to be cautious due to the high volatility and level of risks linked with cryptocurrencies. Shall ICOs be regulated as IPOs and obey existing securities regulations? In order one to make his own opinion about it, here are some of the pros and cons of such a regulation:

-Disadvantages: if money raising fraudulent, no jurisdiction to protect the investors, no equitable ownership, no rights equivalent to being a shareholder, companies have not produced yet any real or tangible results, anonymised transactions

-Advantages: in an ICO, the company may not be subject to direct tax, very little regulatory oversight, firms can raise funds through individuals trading fiat or other virtual currencies, if the money raised does not meet the required amount, the campaign will be written off as a failure and money returned to backers

Companies have raised $180m in ICOs so far in 2017. The question remains if they will still remain so popular whether the regulations will be tightened and whether tokens would be more considered as stocks/shares. Past ICOs should actually be used as a model or a reference to identify good practises and failures and use it to suggest further improvements from a legal point of view. So far, so good.

This is related to what we're building and my background so I will allow myself an answer.

1) ICOs should be regulate but not like IPOs.
First of all, let's keep in mind that each exchange has different rules for what's needed to list an IPO. There is A LOT of inefficiency in the market which causes incredible time delays and additional fees meaning that a lot of good projects with great potential don't have the ability to launch their IPO.
2) For the investors, these additional fees mean lower profits. It means less access to people who do not have an already high net worth so the rich more easily get richer.
To solve this (and deal with the tax issue too amongst a few other things), we are building a financial exchange built on the blockchain. Regarding the regulation, some entities will be regulated onshore, others not regulated and offshore (offshore does not mean illegal!) so as to be able to provide an umbrella service to companies wishing to launch an IPO/ ICO and the investors.
The way we built the coin to provide stability and security is just an added bonus. (Read here to understand what I mean -> https://www.kela.io/the-coin-that-wont-make-you-rich.html )
I would love your feedback and response to this.

[fedor3327]

ICO's are creating so many new opportunities. This is how new ventures start.

Take the one I am currently backing with my signature. Its a bunch of young guys from Maryland university, brilliant minds who will probably make a massive change to the security of the Internet at reasonable price. A fantastic way to utilize block-chain for the Internet.

The problem with regulating cryptocurrency is that the same rules would then have to apply to FIAT currencies. FIAT is in actual fact a cryptocurrency - the difference is the technology with old style encryption. IE water marks and difficult to copy patterns on bank notes.

[ludovicvuillier]

ICO's are creating so many new opportunities. This is how new ventures start.

Take the one I am currently backing with my signature. Its a bunch of young guys from Maryland university, brilliant minds who will probably make a massive change to the security of the Internet at reasonable price. A fantastic way to utilize block-chain for the Internet.

The problem with regulating cryptocurrency is that the same rules would then have to apply to FIAT currencies. FIAT is in actual fact a cryptocurrency - the difference is the technology with old style encryption. IE water marks and difficult to copy patterns on bank notes.

Considering that not even IPOs in fiat currencies are regulated in the same way everywhere, we certainly can't assume that ICO regulation would be the same (the same as which IPO regulation). And yes, it is my background and yes, it is related to our own ICO and what we're working on.

[wavespump]

Good ideas, SEC wants to such things, so maybe in one day, ICO will be regulated like IPO

[megasmart]

I think that idea of ICO is really a good

[ludovicvuillier]

Good ideas, SEC wants to such things, so maybe in one day, ICO will be regulated like IPO

Keep in mind that there are many types of regulations and exchanges worldwide. Not just the SEC and the NYSE.

So this could happen before they get involved and it probably will, if we look at the data.

[MiltonFree]

I'm afraid regulation can bring only decrease in profits and increase the level of inefficiency 

[ludovicvuillier]

I'm afraid regulation can bring only decrease in profits and increase the level of inefficiency 

Depends how it's done.

I agree it's a risk, but the way things are going now, it will happen.

[Tyr808]

ICOs should definitely NOT be regulated.
The massive fluctuations we see in the cryptoworld are possible only as a result of the unregulated environment ICOs and cryptocurrencies are immersed within.. regulate it and you'll get something like the stock market where the only ones who make profits are insider traders and hedge funds.
Regulators please leave our cryptos alone..

[ludovicvuillier]

ICOs should definitely NOT be regulated.
The massive fluctuations we see in the cryptoworld are possible only as a result of the unregulated environment ICOs and cryptocurrencies are immersed within.. regulate it and you'll get something like the stock market where the only ones who make profits are insider traders and hedge funds.
Regulators please leave our cryptos alone..

Actually, that's not the reason for the fluctuations in price. The reason behind the massive fluctuations in price is because there is no ecosystem behind it and the price is based purely on a speculative model. Nothing else. Whereas, fiat currencies, stocks, commodities have financial ecosystems behind it - be it import/ export (for currencies), a company's products/ services (for stocks) and supply/ demand and use in industry (for commodities). All of these have nothing to do with regulation. Regulation would change a few things, but definitely not that.

[posternat]

ICOs have become quite popular to bypass rigourous processes put in place by institutions for startups to raise money and thus finance their activity/project.

However, with no consensus on their legal status and the regulation that should apply, many countries and their institutions are advising people to be cautious due to the high volatility and level of risks linked with cryptocurrencies. Shall ICOs be regulated as IPOs and obey existing securities regulations? In order one to make his own opinion about it, here are some of the pros and cons of such a regulation:

-Disadvantages: if money raising fraudulent, no jurisdiction to protect the investors, no equitable ownership, no rights equivalent to being a shareholder, companies have not produced yet any real or tangible results, anonymised transactions

-Advantages: in an ICO, the company may not be subject to direct tax, very little regulatory oversight, firms can raise funds through individuals trading fiat or other virtual currencies, if the money raised does not meet the required amount, the campaign will be written off as a failure and money returned to backers

Companies have raised $180m in ICOs so far in 2017. The question remains if they will still remain so popular whether the regulations will be tightened and whether tokens would be more considered as stocks/shares. Past ICOs should actually be used as a model or a reference to identify good practises and failures and use it to suggest further improvements from a legal point of view. So far, so good.

No way. That ruins the crypto world and its decentralized nature. Yes, some ICO's scam and some steal from the investors, but that is something we have to learn to live with. The benefits of decentralization way overpower the issues. This is the line we must draw in the sand and never cross. If people fear being scammed, then simply avoid the ICO markets. It is better in the long run to keep to our values and not falter.

[ludovicvuillier]

No way. That ruins the crypto world and its decentralized nature. Yes, some ICO's scam and some steal from the investors, but that is something we have to learn to live with. The benefits of decentralization way overpower the issues. This is the line we must draw in the sand and never cross. If people fear being scammed, then simply avoid the ICO markets. It is better in the long run to keep to our values and not falter.

The main issue isn't being scammed (regulation doesn't do as much as it claims to prevent that), the problem is mostly about the legality of the funds.
There is still a way to keep things mostly decentralized and still have regulation.

[Dullmartini]

Many tokens sold during ico are securities and therefore icos should be regulated so that a minimum amount of investor protection is assured.

However, i don’t think they should be regulated like ipos. Ipos are super expensive (it costs about half a million usd to do an ipo because of all the regulation) and i think it is regulatory overkill. It stifles innovation and makes small companies unable to raise the funds they need. There has to be a better way than what we have now (no regulation and so many scams) and ipos, which are only for big rich companies

[TastyChillySauce00]

No way. That ruins the crypto world and its decentralized nature. Yes, some ICO's scam and some steal from the investors, but that is something we have to learn to live with. The benefits of decentralization way overpower the issues. This is the line we must draw in the sand and never cross. If people fear being scammed, then simply avoid the ICO markets. It is better in the long run to keep to our values and not falter.

The main issue isn't being scammed (regulation doesn't do as much as it claims to prevent that), the problem is mostly about the legality of the funds.
There is still a way to keep things mostly decentralized and still have regulation.

Regarding the legality of the funds, KYC simply solved this, and there are also many projects that take an advice from a legal advisor to comply with the government rules. By that, I assume, there'll be no more problem regarding the legality of the funds and at the same time, could prevent money laundering.
However from my opinion, the regulation doesn't make the ICO's asset centralized, it's just regulating in such region.

[ludovicvuillier]

No way. That ruins the crypto world and its decentralized nature. Yes, some ICO's scam and some steal from the investors, but that is something we have to learn to live with. The benefits of decentralization way overpower the issues. This is the line we must draw in the sand and never cross. If people fear being scammed, then simply avoid the ICO markets. It is better in the long run to keep to our values and not falter.

The main issue isn't being scammed (regulation doesn't do as much as it claims to prevent that), the problem is mostly about the legality of the funds.
There is still a way to keep things mostly decentralized and still have regulation.

Regarding the legality of the funds, KYC simply solved this, and there are also many projects that take an advice from a legal advisor to comply with the government rules. By that, I assume, there'll be no more problem regarding the legality of the funds and at the same time, could prevent money laundering.
However from my opinion, the regulation doesn't make the ICO's asset centralized, it's just regulating in such region.

The KYC asked is the minimal ass coverage required and no more, just like the legal compliance advice that they get. A bit of regulation would most definitely help. I say this from my experience in the financial industry.

As you just wrote - regulation does not make it centralized. I said that because of from your previous comment it seemed you thought regulation would make it centralized.

[Tyr808]

ICOs should definitely NOT be regulated.
The massive fluctuations we see in the cryptoworld are possible only as a result of the unregulated environment ICOs and cryptocurrencies are immersed within.. regulate it and you'll get something like the stock market where the only ones who make profits are insider traders and hedge funds.
Regulators please leave our cryptos alone..

Actually, that's not the reason for the fluctuations in price. The reason behind the massive fluctuations in price is because there is no ecosystem behind it and the price is based purely on a speculative model. Nothing else. Whereas, fiat currencies, stocks, commodities have financial ecosystems behind it - be it import/ export (for currencies), a company's products/ services (for stocks) and supply/ demand and use in industry (for commodities). All of these have nothing to do with regulation. Regulation would change a few things, but definitely not that.

What I am talking about is that, assuming money is a zero-sum-game (which we, as investors, should do), in order for 100x opportunities to be there (see stratis, ethereum, monero..), there need to be several 0x scams. If the environment becomes more regulated, you definitely won't have as many 0x scams anymore that's for sure, but you can also forget about those other gems. That's how I see it - but you make a good point about the lack of an ecosystem being also what makes the price work for cryptos most often than not on a speculative model. Wouldn't say this always apply however; check coins with actual use such as monero and all those coming dexs which will use the token for their functioning (kyber eidoo etc etc etc).
My point is: if you create regulations, societies have to adhere to those in order to function, this create a steeper initial investment in order for a new token to exist and thus 'betting on the underdogs' becomes less interesting.