Concept

An initial coin offering is a method to raise funds for products and services (provided through certain types of currency assets or coins) that relate to crypto space. It is an event where an issuer of coins or similar types of assets sells or floats such coins to raise funds that will support the issue in hitting the market. Investors receive a certain amount of a cryptocurrency in exchange for their investments or financial contributions.

In many aspects, an initial coin offering (ICO) is the cryptocurrency equivalent of an initial public offering (IPO) that is commonplace in the securities market. However, as opposed to IPOs, ICOs are not regulated and as such pose a great deal of risk. Coins issued in an ICO also can carry a certain type of value, other than being a medium of exchange, such as utility for a software service or product. In certain countries, ICOs are unregulated, and issuers and investors are left for their own, having to apply their own measures and due diligence. However, if an ICO meets the classification of a securities offering in a certain jurisdiction, issuance will be in the ambit of a securities and exchange commission’s jurisdiction and is regulated by respective securities laws.

Jurisdictional stance

For the many inherent issues with ICOs, some countries entirely banned ICOs across various jurisdictions within a country, for a number of drawbacks or disadvantages involved in the issue itself and the issuing process. However, ICOs have specific advantages, notably the access it provides to all uses without restrictions as to type or size. New businesses and start-ups can use this type of offering to raise funds in a fast and efficient way. ICOs also come with great potential for profit-making, particularly for investors who select the right coin to invest in at that very early stage of a coin inception. At the time of an offering, prices are usually very low. For coins whose price picks up to high or reasonably high levels in the post-issue stage, uses or investors can see market value reaching astronomical levels (a return of investment measured in three to four digits or even more). Some ICOs may also offer coins at discounted rate upon issuance.