Initial coin offering or ICO is meant to raise funds for cryptocurrency startups. It is some sort of crowd funding or IPOs. This helped startups bypass the rigorous and regulated capital raising process required by venture capitalists or banks.
ICO is somewhat different from crowd sourcing in the sense that investors are enticed with the anticipated success of the cryptocurrency. This means that they would have got the crypto coins at a cheaper price than the value after launching.
Although there have been successful ICO transactions on record and that is the expectation of any investor buying them, you should be cautious of some ICO campaigns which are nothing more than fraud. Fraudsters normally hide behind the lack of regulation and you may never recover the money lost or achieve your intended goal of having bought a stake in an emerging crytocoin.
CHINA BANNED ALL ICOs
Few months back the government of China banned ICOs citing it as impediment to economic and financial stability with many of their populace welcoming the move as well intended. The central bank of the People ’s Republic of china said token cannot be as a currency on the market and that banks are prohibited from handling ICO related activities. This made the value of the major crypto currencies to dip while penalizing offerings already completed. South Korea has also followed suit with a similar ban on ICOs
ICO REGULATION IN US
The ICOs have drifted away from the very intention of the blockchain technology to decentralize the power of networked technology and programmable money from banks and governments to the masses by using them as a quick-rich scheme to get investors’ cash.
Due to this, the U.S Securities and Exchange Commission (SEC) in light of the DAO fiasco last year decided that digital coins and tokens from ICOs should be considered securities and thus subject to federal laws.
A significant increase in ICO regulation means that investors should cautiously participate in ICOs so they can reduce the risks of investing their money on cryptocurrencies.