{"id":1136,"date":"2019-02-15T10:31:59","date_gmt":"2019-02-15T07:31:59","guid":{"rendered":"http:\/\/kusuaks7\/?p=741"},"modified":"2021-12-15T03:02:40","modified_gmt":"2021-12-15T03:02:40","slug":"the-crazy-world-of-crypto-currencies-and-icos","status":"publish","type":"post","link":"https:\/\/www.experfy.com\/blog\/fintech\/the-crazy-world-of-crypto-currencies-and-icos\/","title":{"rendered":"The crazy world of crypto currencies and ICOs"},"content":{"rendered":"

Ready to learn Marketing analytics?\u00a0Browse courses<\/a>\u00a0like\u00a0Blockchain for Finance Professionals<\/a> developed by industry thought leaders and Experfy in Harvard Innovation Lab.<\/em><\/strong><\/p>\n

I\u2019m boarding a flight yesterday and murfing (mobile surfing). \u00a0Flicking between Facebook apps, twitter, bank account, BBC news and more. \u00a0Suddenly I spot a new ICO \u2013 Initial Coin Offering \u2013 for a new bank. \u00a0From Wikipedia:<\/p>\n

\u201cAn\u00a0initial coin offering\u00a0(ICO) is a means of\u00a0crowdfunding<\/a>\u00a0the release of a new\u00a0cryptocurrency<\/a>. Generally, tokens for the new cryptocurrency are sold to raise money for technical development before the cryptocurrency is released. Unlike an\u00a0initial public offering<\/a>\u00a0(IPO), acquisition of the tokens does not grant ownership in the company developing the new cryptocurrency. And unlike an IPO, there is little or no government regulation of an ICO.<\/p>\n

\u201cThe first ICO was for\u00a0Mastercoin\u00a0in 2013.\u00a0Ethereum<\/a>\u00a0raised money with an ICO in 2014. \u00a0\u00a0ICOs are now extremely popular. As of May 2017 there were currently around 20 offerings a month,\u00a0and a new web browser Brave\u2019s ICO generated about $35 million in under 30 seconds.\u00a0There are at least 18 websites that track ICOs.\u201d<\/p>\n

So I see this ICO for a new bank \u2026 sounds interesting. \u00a0The new bank will be using all the hottest and latest tech and offers me a guaranteed 50% uplift on my investment at launch. \u00a0Wow. \u00a0I want in.<\/p>\n

I\u2019m busy moving into Kraken to transfer 100 ETH (Ethereum\u2019s cryptocurency) to seal the deal when, just as I\u2019m about to hit the send button, I stop and pause.<\/p>\n

This whole thing started as I saw an ad on Facebook for a new bank ICO. \u00a0I don\u2019t know anything more than that about this bank. My greed had kicked in, thinking that I\u2019d get 150 ETH back by just transferring 100 over to them today. \u00a050 ETH are worth around $16,000 depending on what day of the week we\u2019re making that valuation, so it\u2019s a healthily profit to be made in a couple of weeks. \u00a0But wait a minute. \u00a0 I don\u2019t anything about these guys.<\/p>\n

Who is behind this bank? \u00a0What credibility do they have? \u00a0Will I really get my money back as, once it\u2019s gone \u2026 it\u2019s gone.<\/p>\n

There\u2019s a real madness in the crypto community today, with a wave of ICOs pushing BTC (bitcoin) and ETH prices upwards. \u00a0Someone at some point is going to say:\u00a0stop the world, I want to get off\u00a0and the whole thing will come crashing down. \u00a0In fact, that crash started last week with BTC and ETH losing 25% of their value in just a week.<\/p>\n

Equally, many ICO offerings are scams. \u00a0Not all \u2013 for example, Bancor is one I am personally vested in \u2013 but Monaco ICO was one in question. \u00a0In fact, there are so many out there that it has become a meme on\u00a0Quora<\/a>:<\/p>\n

Are\u00a0ICO tokens a scam?<\/h2>\n

><\/p>\n

1 ANSWER from\u00a0Terrence Yang<\/a>, Ex-Wall St. lawyer.<\/p>\n

Most ICOs are scams and most cryptocurrencies (other than Bitcoin, \u201caltcoins\u201d) are shit coins. \u00a0Some ICO tokens are not a scam.<\/p>\n

Tim Draper is one of the sharpest VCs in the entire cryptocurrency space. He bought the entire second auction of Bitcoins offered by the US Marshals as part of the Silk Road asset seizure.\u00a0Tim is participating in the ICO of Tezos.\u00a0This is merely social proof \u2014 do your own diligence. \u00a0However, it is a sign that at least one savvy VC does not consider all ICOs a scam.<\/p>\n

Some investors may be more book smart than Tim but what matters in investing is returns and risk. \u00a0You can\u2019t just guess right. You have to make bets. \u00a0Tim took a lot of risk but because he \u201cpulled the trigger\u201d. \u00a0Since then, Bitcoin prices have skyrocketed. Tim\u2019s mark to market returns are probably fantastic (I don\u2019t know if or when he sold his Bitcoin.)<\/p>\n

With ICOs adding to the confusion of what is already a confusing market of crypto and digital currencies \u2013 BTC, ETH, XRP and more \u2013 the rule here has to be\u00a0caveat emptor, buyer beware, and for a more detailed look, here\u2019s a great article from\u00a0Reuters<\/a>\u00a0by\u00a0Henry Engler<\/a>:<\/p>\n

\u201cInitial coin offerings\u201d present dangers to investors, new challenge for U.S. regulators<\/p>\n

NEW YORK (Thomson Reuters Regulatory Intelligence) \u2013 The explosive growth of \u201cinitial coin offerings,\u201d a capital-raising tool that uses bitcoin and other crypto-currencies to fund projects that leverage technologies such as blockchain, has sparked concern among experts who warn that the lack of transparency around the issuance of such coins is a concern for both investors and regulators.<\/p>\n

The Securities and Exchange Commission is said to be taking a hard look at the increased use of such offerings, with the growth of so-called ICOs surging in recent months. The overall value of the coin market is estimated at over $90 billion, and the frenzied activity has fueled a record-breaking rise in the price of bitcoin, which hit an all-time high of $2,911.86 this week, according to the CoinDesk Bitcoin Price Index (BPI)[here<\/a>].<\/p>\n

ICOs have become mired in an ongoing industry debate, with critics likening the phenomenon to the dotcom bubble in the 1990s, while proponents say the use of such coins and offerings facilitates the type of innovation that could radically transform existing business processes and industries.<\/p>\n

HOW DO ICO\u2019S WORK?<\/h2>\n

><\/p>\n

A simplistic interpretation of the issuance of such coins, or tokens, is that they are an investment on a possible future payoff. For example, if a startup technology firm has a business plan to apply blockchain for a certain solution, say, improve the back-end of securities or payment processing, or enhance record keeping in the insurance sector, investors would purchase the tokens before such a solution is actually realized or operational. The ventures could receive the tokens for payment in future development of their business.<\/p>\n

The tokens do not in themselves confer ownership of a stake in the business. Depending on how the deal is structured, the investment in the tokens might lead to a future share in revenues of the venture. In other cases, the investment can be compared to fund-raising or a crowd-funding vehicle, using tokens that could be redeemed for cash at a later date once the venture is successful. Since the issuance of such tokens is currently outside the scope of regulatory oversight, they are seen as a quick way in which tech startups can raise capital without all of the necessary requirements that would come with, say, an initial public offering in stocks.<\/p>\n

But what seems to be fueling a lot of the recent flows into such tokens is their speculative potential, and the ability to take the tokens and exchange them for cash on many of the world\u2019s crypto-currency exchanges. If the coin is listed on an exchange after its initial offering, then the likelihood that its value increases grows considerably, say some observers.<\/p>\n

However, not all ICOs are created equally. Due to the complexity of the underlying projects, experts argue that investors need to have the technical expertise to be able to evaluate whether investing in an ICO makes sense. Moreover, the startup itself should provide sufficient information for investors to evaluate the investment. In some cases, the information is inadequate.<\/p>\n

\u201cLots of good things have come out of the relative flexibility of ICOs and to raise capital efficiently from a community that understands the process,\u201d Ajit Tripathi, director of fintech and digital banking at PwC, recently told Regulatory Intelligence.<\/p>\n

\u201cOverall, it\u2019s a very interesting model in raising capital, but the relative lack of transparency is a concern,\u201d he added. \u201cSome tokens have no disclosure or underlying prospectus\u2026.the overall lack of transparency is the main issue.\u201d<\/p>\n

WHEN IS A TOKEN A SECURITY?<\/h2>\n

><\/p>\n

From a regulatory and legal perspective what remains contentious is whether the issuance of such coins are the equivalent to the creation of a new security, and should therefore come under the oversight and regulation of the SEC.<\/p>\n

Peter Van Valkenburgh, director of research at crypto-currency advocacy group Coin Center, told a recent New York conference that what participants in the market want to avoid is the creation of a token that acts as a security.<\/p>\n

\u201cIt\u2019s like painting a target on yourself. Because, what does an organization like the SEC regulate? They regulate IPOs,\u201d Van Valkenburgh told a panel on the legality of ICOs.<\/p>\n

\u201cThat\u2019s what they regulate. So, let\u2019s just change one letter and make it a \u2018C\u2019 and then it\u2019s OK, right? No. Why would you adopt the terminology of the regulator when you\u2019re building a thing you hope they don\u2019t regulate?\u201d he asked.<\/p>\n

The SEC\u2019s view on the issuance of such tokens is less than clear given the lack of public comment to date. But industry experts say they are aware that the issue is being actively explored.<\/p>\n

\u201cI know that this is something that\u2019s high on their radar,\u201d said a U.S. regulator who requested anonymity.<\/p>\n

What might be a guide to the SEC\u2019s thinking is its recent decision to block the listing of the first U.S. exchange-traded fund tracking bitcoin. A more-than-three-year effort by investors Cameron and Tyler Winklevoss to convince the SEC to allow it to bring the Bitcoin ETF to market stalled when the agency\u2019s staff ruled against them in March. The agency has since said it will review its prior decision (here<\/a>).<\/p>\n

Tripathi of PwC says the SEC decision shows the agency recognizes the benefits of the ICO marketplace, but is also concerned by the lack of oversight and transparency from the exchanges on which the coins are traded.<\/p>\n

\u201cThese exchanges where tokens are traded are not exactly transparent or have the right regulatory structure or supervision,\u201d said Tripathi. \u201cIt\u2019s very easy for participants to manipulate prices\u2026which the SEC highlighted in its opinion on Winklevoss.\u201d<\/p>\n

Specifically, the commission said it did not find the proposal to be consistent with the Securities Exchange Act, which requires \u201camong other things, that the rules of a national securities exchange be designed to prevent fraudulent and manipulative acts and practices and to protect investors and the public interest.\u201d<\/p>\n

In order to address the agency\u2019s concerns, two things [here<\/a>] were needed.<\/p>\n

\u201cFirst, the exchange must have surveillance-sharing agreements with significant markets for trading the underlying commodity or derivatives on that commodity. And second, those markets must be regulated,\u201d the commission said.<\/p>\n

Whether the ICO sector, populated with numerous companies, small and large, who see their unfettered status as innovators a large part of their mission and appeal, can organize themselves to meet such requirements is very much in question at the moment<\/p>\n

Originally posted at the <\/a>Finanser<\/a><\/p>\n","protected":false},"excerpt":{"rendered":"

Ready to learn Marketing analytics?\u00a0Browse courses\u00a0like\u00a0Blockchain for Finance Professionals developed by industry thought leaders and Experfy in Harvard Innovation Lab. I\u2019m boarding a flight yesterday and murfing (mobile surfing). \u00a0Flicking between Facebook apps, twitter, bank account, BBC news and more. \u00a0Suddenly I spot a new ICO \u2013 Initial Coin Offering \u2013 for a new bank.<\/p>\n","protected":false},"author":46,"featured_media":4300,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"content-type":"","footnotes":""},"categories":[192],"tags":[98],"ppma_author":[1669],"class_list":["post-1136","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-fintech","tag-blockchain"],"authors":[{"term_id":1669,"user_id":46,"is_guest":0,"slug":"chris-skinner","display_name":"Chris Skinner","avatar_url":"https:\/\/secure.gravatar.com\/avatar\/?s=96&d=mm&r=g","user_url":"","last_name":"Skinner","first_name":"Chris","job_title":"","description":"Chris Skinner is known as an independent commentator on the financial markets and fintech through his blog, the Finanser.com<\/a>, as author of the bestselling book Digital Bank<\/em><\/a> and its new sequel ValueWeb<\/em><\/a>.  <\/em>He is Chair of the European networking forum The Financial Services Club and Nordic Finance Innovation, and a Non-Executive Director of the Fintech consultancy firm 11:FS.  He is on the Advisory Boards of many companies including B-Hive, Bankex, iambank, IoV42, Innovate Finance, Life.SREDA, Moven, Meniga, Pintail, Project Exscudo and the Token Fund, and has been voted one of the most influential people in financial technology by the Wall Street Journal’s<\/em> Financial News<\/em><\/a>.   <\/em>"}],"_links":{"self":[{"href":"https:\/\/www.experfy.com\/blog\/wp-json\/wp\/v2\/posts\/1136","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/www.experfy.com\/blog\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/www.experfy.com\/blog\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/www.experfy.com\/blog\/wp-json\/wp\/v2\/users\/46"}],"replies":[{"embeddable":true,"href":"https:\/\/www.experfy.com\/blog\/wp-json\/wp\/v2\/comments?post=1136"}],"version-history":[{"count":3,"href":"https:\/\/www.experfy.com\/blog\/wp-json\/wp\/v2\/posts\/1136\/revisions"}],"predecessor-version":[{"id":28360,"href":"https:\/\/www.experfy.com\/blog\/wp-json\/wp\/v2\/posts\/1136\/revisions\/28360"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/www.experfy.com\/blog\/wp-json\/wp\/v2\/media\/4300"}],"wp:attachment":[{"href":"https:\/\/www.experfy.com\/blog\/wp-json\/wp\/v2\/media?parent=1136"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/www.experfy.com\/blog\/wp-json\/wp\/v2\/categories?post=1136"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/www.experfy.com\/blog\/wp-json\/wp\/v2\/tags?post=1136"},{"taxonomy":"author","embeddable":true,"href":"https:\/\/www.experfy.com\/blog\/wp-json\/wp\/v2\/ppma_author?post=1136"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}