Understanding the Global Crypto Climate — What are the Landing Spots for the Most Successful ICOs?
ICOs are an exciting investment opportunity — both for individual investors looking to diversify portfolios, as well as those looking to fund crypto startups. But the space is fraught with confusion as well. Research has found that as many as 80 percent of ICOs prove to be scams, while as few as 8 percent ultimately reach an exchange. In spite of this, several highly profitable ICOs have demonstrated to investors that there are opportunities here that may be too good to ignore. The challenge is distinguishing between a good ICO/crypto/blockchain project, and a bad one.
by Andrea-Franco Stöhr, CEO, Crypto Finance Conference
Though it is no guarantee of success and gains, the geographic origination of ICOs seems to be an indicator of how profitable an ICO will be. We analyzed publicly available data of the top 100 ICOs by amount raised to find where companies and teams were most commonly located. The US ranked first and was responsible for 30 projects — twice as many as Switzerland, which ranked second. Singapore rounded out the top three with 11 projects. What factors are driving the success of these regions?
When we reported the US is the leading region for ICOs, many didn’t believe us, noting the US’s slow-growing blockchain ecosystem, the SEC’s delay in creating regulation, and a general sense that the US is inhospitable to ICOs and cryptocurrencies. But the US is in fact leading the way, likely the result of its sheer size and position as a global business leader, which naturally gives it the greatest number of cryptocurrency experts and investors (there is strength in numbers after all). We saw several ICOs (e.g. Tezos) orchestrated by experts residing in the US, even if the fundraising entities themselves were headquartered elsewhere.
While the creation of regulations has been slow and at times ambiguous, that has not put a hamper on innovation within the broader US ICO and cryptocurrency ecosystem. The US is the home to some of the most stable, secure and regulated crypto exchanges (Coinbase) and fundamental industry platforms, such as Coinlist and Republic. Legal tools for tokensales such as SAFT and SAFE-T were also created in the US, and one of the biggest public ICOs in history (Filecoin) took place in the US. In summary, the pioneering spirit, capitalist mindset and startup culture that are hallmarks of US business are continuing to spur ICOs in the region, in spite of the fuzzy regulation and other obstacles. Exclusive, application-only investor conferences on ICOs and cryptocurrency investments are now being scheduled in the US, providing an overview of the most compelling issues and questions members of the investment community face as they dip their toes in these waters.
Switzerland, which has long been a destination for those looking to store large amounts of wealth, is also proving to be a global hub for ICOs. It has many of the right conditions for a cryptocurrency ecosystem to flourish — highly educated populace, a cluster of rich investors, a low tax rate and a decentralized approach to government that is conducive to decentralized currencies. Switzerland also has a solid bench of blockchain technology experts that is eager to share and expand their knowledge, as evidenced by the establishment of the “Crypto Valley” in the city of Zug 2017. Today, the Crypto Valley has active connections to international centers of blockchain innovation in London, Singapore, Silicon Valley and New York. Most recently, Zug unveiled a first-of-its-kind blockchain based voting test, which will be Switzerland’s first electronic voting test.
But perhaps the biggest factor in Switzerland’s ICO success is the generally shared and open attitude towards innovation and change. In January, Economics Minister Johann Schneider-Ammann publicly declared Switzerland’s “crypto-nation” vision at a cryptocurrency investor conference. The Swiss government recently announced their backing of a new group called “Taskforce Blockchain,” designed to study and better establish the region’s regulatory framework around blockchain startups and ICOs. Additionally, last year Switzerland proposed a “regulatory sandbox” whereby companies of a certain size can experiment with different technologies and fund-raising approaches in a safe way — a clear sign of the government’s desire to attract blockchain startups. Switzerland as a whole seems to share the view of cryptocurrencies as a huge wave of wealth and value creation that they don’t want to miss. Projects tend to flow where they are welcome, and capital follows.
Singapore’s pre-existing status as one of the world’s major financial and trading hubs gives it a natural advantage as a preferred ICO location, as it is highly connected and linked to global trade flows. Other advantages include its proximity to China (which has effectively banned ICOs, making Singapore a logical ‘safe haven’); it is location within the Asia Pacific, which is the world’s fastest growing economic region; and its English-speaking population which makes doing business easier.
Singapore is also further ahead than many other countries in the area of regulation. There is strong collaboration between the government and banks on cryptocurrency-related matters. For example, the Monetary Authority of Singapore (MAS) recently worked with several banks and other organizations to conduct a distributed ledger trial that tied digital tokens to the national currency. Another factor contributing to Singapore’s success is the relative ease and speed with which one can set up a business there.
Regardless of where investors choose to invest in or conduct ICOs, there are several well-established guidelines that should always be followed:
- Be extremely careful and take into account the country of the ICO project and your own residence to make sure your investment will be legal.
- Learn more about the project team. They should have experience in the industry they are going to disrupt and they should have some experienced blockchain developers in their leadership team.
- Study the online communities of the project and learn the experts’ opinion. You need to ensure that the project has its own genuine token, not just substituting Ethereum.
- Be especially careful if the ICOs has not implemented the now-standard Know Your Customer (KYC) policy, which identifies customers in order to help governments fight theft, fraud, money laundering and terrorist funding. It’d better to avoid those.
- If you participate in an ICO through SAFT or SAFE-T, check the lock-up period (the window of time when investors are not allowed to redeem or sell their tokens) you will have according not just to the ICO documentation, but also local regulations.
The US, Switzerland and Singapore share some common threads that are positioning them as leaders in the ICO and cryptocurrency space, including a high concentration of global wealth and expertise, an entrepreneurial ethos that welcomes change and innovation, and a vested interest on the government’s behalf. The UK and particularly Estonia — with its tax-friendly policies and e-residency registration program, which allows startups to be incorporated and tax-compliant within a matter of minutes — have also been identified as promising up-and-comers. As this space continues to evolve in the years to come, we expect these regions to continue their significant contributions, particularly in the areas of knowledge and idea sharing, technological know-how, making and fostering critical connections and setting precedents for regulation.
Andrea-Franco Stöhr is the CEO of Crypto Finance Conference, an exclusive investor conference on cryptocurrencies and blockchain investments. Their inaugural US event will take place in San Francisco from September 5–7, 2018. Like all their events, the September conference will feature pre-eminent speakers, networking opportunities and talks on how the market is likely to evolve, in both the short-term as well as long-term. Investors interested in being considered for attendance can apply here.