Predict The Future of the Future of Finance. Initial coin offerings.
Predict The Future of the Future of Finance. The question of whether the blockchain ends with nothing or everything, continues to be asked without a final answer. As Bitcoin’s Price bounces, and the media shift from a lifeless illumination of the problem, it may seem that the revolution has stopped.
Initial coin offerings (ICOs) are a good objective lens across which we can view problems stimulating regulators and market participants. In fact ICOs are electronic tokens, commonly based on the blockchain technology emphasizing a functionally analogous but more multifunctional cousin of Bitcoin – Ethereum.
ICOs usually function as a “smart contract” application layer — in fact a small piece of code that prescribes certain rules managing the ICO’s existence — over the existing blockchain network.
Soft but not safe
The original concept of ICO, hiding behind the technology to prevent regulation, is ending now. Article written by Matt Levine “Crypto Offerings Slowly Grow Up,” provides more information on what has happened.
In fact, trying to act outside the frames of any regulators, what paradoxically ICOs accomplished is that it draws the attention of all regulators, even ones only on a tangent concerning the formation of capital.
US Treasury Financial Crime Enforcement Network’s recent record provides an example of this as well. It believes that the developers issuing ICOs act as money senders who must comply with the Regulations on Combating Money Laundering and Terrorism.
Certain amount of ICOs have sought to follow a certain medium path, using the simple Simple Agreement for Future Tokens (SAFT) mechanism, encouraged by innovations of the convertible note of venture capital in the world i.e. the Simple Agreement for Equity (SAFE).
The SAFT structure considers that the issuer usually offers coupons to authorized investors using confidential premise for the further purchase of tokens that will be released publicly to the ICO after the development of the product or service.
Therefore, the SAFT transforms these stocks into non-security utility tokens during the ICO once the service is started. Thus, the coupons are to separate the venture capital / speculative stage of ICO from the consecutive stage of using the ICO.
The CFA Institute is interested in issues related to the formation of capital, especially given the century-old decline in the number of IPOs and mentioned companies over the past 10 years. ICO is acurious new approach that immediately solves some problems with the formation of capital, raising new issues and themes for regulators and market structure.
Since the crowdfunding industry is trying to impress after many years of deception, it will be interesting to see if the ICOs can leave its speculative origins and become a more solid instrument for allocating capital.