Is the ICO Market Dead? STOs to the Rescue?

Is the ICO Market Dead? STOs to the Rescue?

The SEC punished several ICOs in 2018. This threw much of the rest of the industry into a panic. You see, the SEC regulates the way businesses raise funds. A company can’t simply raise millions or billions (looking at you, EOS!) without submitting to certain legal and ethical frameworks, each meant to protect investors.

For the most part, 2017-era ICOs just didn’t do this. Instead, they grabbed at the millions floating through the market froth and didn’t worry about the consequences. Meanwhile, many of these ICOs were acting just like securities offerings (not allowed). They offered equity value in companies, issued dividend-like rewards, and offered voting rights to investors.

Today, ICOs have to be very, very careful. That’s why we have so few of them. No ICO wants to worry that, a year after they finish their token sale, the SEC will come knocking. This has led the industry to evolve into something new. Goodbye ICO; hello STO.

The Security Token Offering (STO) is basically an ICO that follows closely to SEC (and other international) regulatory frameworks. It’s important here to note that the global regulatory bodies are starting to view crypto assets as three distinct categories: Cryptocurrencies (Bitcoin BTC, Litecoin LTC), Utility Tokens (Ethereum ETH), and Securities Tokens (smaller ICO-type coins, most of which are yet to be formalized). New blockchain companies that want to raise money but know for sure that they’d fall afoul of SEC regulations as an ICO, are restructuring themselves as STOs – ICOs which are compliant with securities law from the very start.

What does this mean? Well, you’ll still have the opportunity to invest in interesting blockchain companies but you’ll have to give up more personal information than you used to. This will make you safer and less likely to fall victim to fraud. It will also prevent slapdash blockchain companies from entering the space. It may also put an end to miraculous investments that make 20X overnight. But we believe it’s ultimately good for an industry that must mature and stabilize to survive.

Featured image source: Wright Studio – Shutterstock

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