2017 is a year for a new investing way of startup projects called ICO. Initial Coin Offering is a way to attract investors’ funds at an early stage (even at absolutely zero stage) of the project.
The main difference of this method, which caused real excitement, is simplicity. With the help of a cryptocurrency, anyone could invest in a startup which inspires faith. In other words, ICO has collected the positive features of classic IPO and crowdfunding.
No one doubts the popularity of this way for raising funds. According to Coinschedule, more than 230 ICO campaigns were conducted in 2017, with a total investment of almost $4 billion. Infrastructure innovations and financial products are the most popular project’s categories, but young startups pursue a wide variety of goals.
In the past year, such original coins as JesusCoin, KekCoin, TrumpCoin (also PutinCoin does exist too :D), Useless Ethereum Token, GarlicCoin, UFOCoin appeared on the cryptocurrency market.
We must mention a digital coin DOGE, which was created on the popularity wave of Doge****Meme with a cute dog breed Shiba Inu. Do you know why we mentioned it in particular? Because its capitalization exceeded $232 million.
A really cool meme, isn’t?
The pace of new projects’ development and appearance is increasing.
90% of all conducted ICO was in 2017, and according to experts, this year will show greater results.
What will SEC say?
Along with the new projects number growth, cryptocurrency will face significant changes. Yes, we are talking about the regulation. During 2017, financial and supervisory authorities kept an eye on new ICO-projects and tried to create a legislative base for its control. For example, China even banned initial coin offerings on their territory.
SEC (Security and Exchange Commission) — a regulatory body of the United States, created to protect investors in the securities market. The main task is to prevent crimes and any fraudulent actions connected to financial manipulations. Despite the fact that SEC regulates the securities circulation within the USA, its decisions affect to almost all crypto projects.
In a recent statement, Jay Clayton (the head of SEC) said that he had not seen an ICO, which was not a sale of shares in its main idea. In other words, Clayton expressed a wary attitude to projects, attracting such investment.
SEC vs ICO
As we have already said, the main goal of SEC is to ensure investing transparency and to protect investors from fraudsters. One of the ways to recognize an ICO project as dangerous for an investor is a** low score in the Howie test**. This test was specially developed in US judicial practice to determine whether the object is a security.
According to the Howie test, any token will be a security if it comes to:
— Investment of funds,
— Receiving profit,
— Shares of an enterprise,
— Profits exclusively from the seller or third parties work.
Unlucky with SEC decision:
- ReCoin. The first case in history, initiated against the ICO project. The Securities Commission accused Maxim Zaslavskiy, head of the ReCoin Group Foundation project of** fraud and violation of the rules for registering** securities. Recoin was a digital asset, secured by real estate. The project team intends to challenge Regulator’s decision.
- The DAO. One of the most famous ICO — the DAO project also attracted Commission’s attention. In July 2017, SEC recognized DAO tokens as securities, with all ordinary consequences.
- PlexCoin. Gathered over $15 million in crowdfunding, the PlexCoin project was also defeated in a fight with SEC. On December 1, SEC quickly froze project’s assets due to the failure of the registration requirements. The project promised high profitability to its investors, who made a contribution to the development of a new promising decentralized cryptocurrency.
- Munchee. One of the most promising projects. Its token was usable already at the fundraising stage. Munchee project was forced to stop its activities and return funds to investors, after the recognition of its ICO as a securities deal.
- AriseBank. Recently, SEC has filed charges against a banking organization that conducted its ICO. AriseBank was accused of fraud and sale of unregistered securities. The team is sure in rightness and plans to fight for the right to sell its own token.
What’s the answer?
Of course, the best and most favorable development for any project is the choice in favor of taking into account regulators’ views.
Solar DAO constantly monitors the opinions of commissions and government, considering it. We do the best to ensure that our project meets the requirements and is convenient for our participants. Thank you for participating!
Solar DAO — a tokenized fund designed for everyone to easily participate in PV solar plants construction across the globe. SDAO tokens on: YoBit.