An initial coin offering (ICO) or initial currency offering is a type of funding using cryptocurrencies. It is often a form of crowdfunding, although a private ICO which does not seek public investment is also possible. In an ICO, a quantity of cryptocurrency is sold in the form of "tokens" ("coins") to speculators or investors, in exchange for legal tender or other (generally established and more stable) cryptocurrencies such as Bitcoin or Ether. The tokens are promoted as future functional units of currency if or when the ICO's funding goal is met and the project successfully launches.
An ICO can be a source of capital for startup companies. ICOs can allow startups to avoid regulations that prevent them from seeking investment directly from the public, and intermediaries such as venture capitalists, banks, and stock exchanges, which may demand greater scrutiny and some percentage of future profits or joint ownership.[citation needed] ICOs may fall outside existing regulations,[1][2] depending on the nature of the project, or be banned altogether in some jurisdictions, such as China and South Korea.
Due to the lack of regulation and enforcement of securities law, ICOs have been the vehicle for scams and fraud.[3][4][5][6] Fewer than half of all ICOs survive four months after the offering,[7] while almost half of ICOs sold in 2017 failed by February 2018.[8] Despite their record of failure and the falling prices of cryptocurrencies, a record $7 billion was raised via ICO from January–June 2018.[9]
^"Company Halts ICO After SEC Raises Registration Concerns". SEC. Retrieved 2017-12-15.
^"Carey Olsen and JTC advise ARC Fiduciary Ltd on Jersey's first ICO". Carey Olsen. 14 December 2017. Retrieved 2017-12-15.
^Shifflett, Shane; Jones, Coulter (May 17, 2018). "Buyer Beware: Hundreds of Bitcoin Wannabes Show Hallmarks of Fraud". Wall Street Journal. Retrieved May 18, 2018.
^"ICO – HOWEYCOINS If You Responded To An Investment Offer Like This, You Could Have Been Scammed – HoweyCoins Are Completely Fake!". Investor.gov. U.S. Securities and Exchange Commission. Retrieved May 18, 2018.
^Chohan, Usman (2017). "Initial Coin Offerings (ICOs): Risks, Regulation, and Accountability". Regulation of Financial Institutions Journal. Discussion Paper Series: Notes on the 21st Century. doi:10.2139/ssrn.3080098. S2CID 168942381. Retrieved 8 February 2018.
^"ICO Bubble? Startups Are Raising Hundreds of Millions of Dollars Via Initial Coin Offerings". Inc.com. 14 July 2017. Retrieved 2017-07-18.
^Kharif, Olga (9 July 2018). "Half of ICOs Die Within Four Months After Token Sales Finalized". Bloomberg. Retrieved 13 July 2018.
^Hankin, Aaron (February 26, 2018). "Nearly half of all 2017 ICOs have failed". Fortune. Retrieved May 4, 2018.
^Robertson, Benjamin (2 August 2018). "Crypto Bulls Pile Into ICOs at Record Pace Despite Bitcoin Rout". Bloomberg. Retrieved 2 August 2018.
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