Initial coin offerings are still a controversial prospect in the financial sector. A growing number of fraudulent projects makes this industry appear far less legitimate. It is these scams which get all of the attention, leaving legitimate ICOs out in the cold. Turning this situation around will not be easy.
Making ICOs More Appealing
A few key factors about initial coin offerings often stand out. First of all, these projects raise millions of dollars in very quick succession. For most companies, it takes them a few weeks to cap out at a value of $5 million to $20 million without issues. All of this positive attention confirms the interest in ICOs has not waned in the slightest. Throughout early 2018, more money has been raised compared to all of 2017 combined.
The second key factor is the number of scams and fraudulent projects. Initial coin offerings are not always legitimate and trustworthy. It is believed over eight in ten projects are fraudulent for a wide variety of reasons. This is a worrisome statistic which makes initial coin offerings less appealing. Despite the negative trend, a lot of legitimate projects successfully raise money as well.
Finding the right ICO business model for a specific use case is not easy. Different options can be explored in this regard. However, they all need to comply with existing legal, financial, and regulatory guidelines. A lot of countries are still drafting guidelines for initial coin offerings. Any upcoming changes need to be incorporated by projects as soon as possible.
The Positive Aspects Matter
For all the negative attention initial coin offerings receive, their true potential shouldn’t be overlooked. This new way of raising money can help create a completely new economic ecosystem. Companies can raise money without dealing with venture capitalists. Consumers can invest in projects they believe in and potentially reap the rewards in the long run. Innovation is both supported and rewarded through initial coin offerings.
These are still the early stages of the ICO industry. It is only normal that a lengthy period of trial and error needs to be conducted. Based on the current status of the industry, regulators can formulate proper guidelines for companies to adhere to. The bad projects will need to be weeded out as soon as possible. With the SEC cracking down on fraudulent ICOs, an important initial step has been taken.
How the ICO industry will evolve is difficult to predict. Some countries actively ban this type of activity altogether. Others, such as Malta, keep a more open mind toward initial coin offerings. New innovation hubs will emerge thanks to positive regulatory developments. Those changes will create a more robust ICO industry all participants can benefit from.
Have you been burned by a fraudulent ICO? Let us know in the comments below.
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