One of an ICO investors’ greatest fears will be that a coin purchase turns out to be a scam, with this actually putting a lot of people off investing. This in turn stops money flowing to truly deserving ICOs that are legitimate and have amazing potential. Under new EU crowdfunding regulations – which could extend to some ICOs – companies seeking to raise money through crowdfunding would need to disclose information regarding the conduct of business, risk management, due diligence, and information. This would become a standard throughout the EU and would apply to a number of ICO styles. The end goal of such measures is that it should make the ICO investment space safer for investors – in turn attracting more investors.
Not All ICOs Would Be Affected
Unfortunately for investors, not all ICOs would have to submit this documentation when they launch, but this could be the first step that is needed towards regulating the increasingly crowded ICO market. As Leon Siegmund – head of sales and marketing for Moon Zebra – said in an exclusive interview with BitStarz News, baby steps are the best way to progress in the crypto world. The baby steps the EU is making towards regulation of crowdfunding could eventually be tweaked and reshaped to be used within the broader ICO market.
ICOs are Effective to Gain Startup Capital
ICOs are proving to be more popular within the cryptosphere and more companies are choosing to use an ICO as a means to raise capital over a more traditional IPO. The main difference being that with an IPO there is a whole lot of paperwork and checks involved – plus the public owns part of the company – whereas an ICO simply sells tokens that can then be used later on when the platform or project has been launched. When we spoke with Damian Merlak – founder of Bitstamp and Tokens.net – he admitted to using an ICO to raise capital to create tokens.net.
ICO Regulation is Needed
Not all ICOs are scams, but there is a handful which are and these are damaging the name of ICOs and are making investors scared to invest. Just recently, Aussie cricket legend Michael Clarke Tweeted a promotion for a new ICO, but he received torrents of backlash as the ICO is for a controversial Aussie crypto exchange. Unfortunately, it’s ICOs like this that damage the reputation of the industry and with regulation, these could be weeded out. This is the first step towards ICO regulation and companies are welcoming the potential new measures.
While there are some hot ICOs going on at the moment, there is some potentially dodgy ones around as well. This new crowdfunding regulation will come as a welcome change to investors, as they will be able to view key documents that highlight the legitimacy of the project, much like a Key Investor Information Document (KIID) that exists in fund investments. While this regulation has the potential to make launching an ICO harder and more time consuming, it is for the greater good, as investor safety should be every ICOs number one priority.