The Next Generation of ICOs Will Actually Have to Follow the Rules
The SEC is cracking down on ICOs. But blockchain-based fund-raising won’t die — it will just evolve
By Mike Orcutt
The Wild West days are over. That was the unmistakable warning the US Securities and Exchange Commission gave to investors and cryptocurrency exchanges in a statement on initial coin offerings earlier this month. What comes next depends on how regulators decide to categorize different kinds of crypto-tokens. But a handful of startups aren’t waiting around; instead they are trying to exploit existing crowdfunding rules to reinvent the ICO so it can comply with financial regulations.
Version 1.0: Entrepreneurs have raised around $10 billion since the beginning of 2017 via ICOs, which involve minting digital “tokens” and selling them to investors. Many of these entrepreneurs say what they are hawking is not a security, or a traditional investment like a stock or bond, but something more like an arcade token that gives access to blockchain-based goods and services. Typically, however, buyers are simply betting that their tokens’ value will rise, and that they will be able to profit by selling them on online trading platforms. (What the hell is an ICO? ← Here’s a primer.)
