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Cryptocurrency ICOs Remain A Gray Area Where Legality is Concerned


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It is evident cryptocurrency is quickly becoming the go-to gift for Christmas. Consumers are flocking to Bitcoin because it offers financial freedom, and allows them to bypass financial turmoil in their home country. Moreover,t the number of cryptocurrency startups raising money is surging. But all of these ICOs are unregulated, which causes some concern among potential investors.

Should We Expect ICO Regulation In The Future?

One of the more popular trends throughout 2016 is the growing number of initial coin offerings. Virtually every upcoming cryptocurrency projects have their own native token, which is offered to investors during an ICO campaign. These companies also hope to raise additional money during the ICO, so they can fund development and spend some money on marketing.

Some of these projects have been quite successful, raising millions of dollar in mere hours. Investors see these opportunities as a way to get involved in cryptocurrency and make a profit along the way. Unfortunately, it remains to be seen if that will be the case, as every project requiring a native currency will only create a more fractured ecosystem as a whole.

What makes these ICOs, so appealing is how there is no paperwork involved in the process. This is both a blessing and a curse, as it goes to show how ICOs are unregulated. While regulation and cryptocurrency are hard to combine, things are quite different when it comes to public investment rounds. But are ICOs even legal by definition?

That question is very difficult to answer right now, as there are no laws prohibiting cryptocurrency companies from hosting an ICO and raising funds. Unfortunately, if an investor loses funds during this process, they have no course of action to recover money. So far, this has not been a big problem, but it is only a matter of time until someone takes these matters to court.

Additionally, hosting an ICO whereby native tokens are sold as securities can be considered a violation of the law in virtually every country. For now, there is no indication whether or not this will become an issue over time, but it is not unlikely some regulation will be introduced in the future. If the SEC were to investigate ICOs, things could go from bad to worse rather quickly for all participants.

Even though vast amounts of money change hands during an ICO, these amounts pale in comparison to more traditional securities sales. Until large amounts are lost by investors, there will be no special investigations into these token offerings. It is always possible the company organizing such an ICO will run off with them money, but that is a gamble investors have to take, for now.

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JP Buntinx
JP Buntinx
JP is a freelance copywriter and SEO writer who is passionate about various topics. The majority of his work focuses on Bitcoin, blockchain, and financial technology. He is contributing to major news sites all over the world, including NewsBTC, The Merkle, Samsung Insights, and TransferGo.


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