Remember Initial Coin Offerings (ICOs)? Filecoin’s ICO raised over $257 million last year. Ethereum, who had their initial coin offering way back in 2014, sold 11.9 million ether tokens and raising an eye-watering $16 million. And the ICO for Block.one’s EOS platform raised over $185 million. One narrative goes that ICOs were the Next Big Thing for a long time, offering huge returns on investment and an innovative new way to raise capital – until the regulatory authorities started to clamp down on them. So, did this mark the end for a financial phenomena that has taken the financial markets by storm over the last couple of years? My hunch is not – and here’s why.
My first reason is the attitude of the authorities in Zug, where my own OMNIA business is headquartered. The Swiss financial policy makers have generally backed the right horse over the years, and I don’t see any reason to change that opinion now. The approach that they’ve taken to regulating crypto currencies – including the raising of capital via ICOs – has been typically open, and I think this will continue. It has helped to create a thriving community of like-minded innovators in the so-called Crypto Valley in Zug, and I think this will be a policy that should continue for some time.
A positive outlook
But what’s the broader outlook for ICOs? Well, I think that one of the most fundamental issues that the new breed of financial innovators will need to address in 2018 and beyond is security. So much of the way that the global financial system works is down to faith – faith in the stability and security of the systems and processes that underpin the markets. And the fact is that the blockchain technology that works behind crypto currencies, and the technology that supports the actual nuts and bolts of any Initial Coin Offering – the digital wallets, the web pages and the smart contracts – is all still relatively new. Ensuring the security of all of these different elements – and protecting potential investors from the attentions of ever more sophisticated hackers – is, I believe, absolutely fundamental to making sure that ICOs can be viable again.
Because if we get these kinds of security details right, then I believe that the ICO boom will continue through 2018, even in the face of increasing regulation from financial authorities. A big part of this, I think, is down to the rate at which this kind of technology accelerates – the applications of blockchain technology are increasing every day, and ICOs will remain a valid way of raising the necessary capital to fund this growth. It’s also possible that ICOs, and blockchain-based cryptocurrencies in general, will simply become more mainstream in the years to come – while it’s clear that the authorities are quite rightly keen to clamp down hard on those who are attempting to cheat investors, as the market grows, and the regulations become clearer, I think that regulatory involvement will ultimately only be a positive influence.
Trust, transparency and reliability are fundamentally important to any financial process or system, and so I think that it is actually a positive sign that the authorities are taking more of an interest in crypto currencies and ICOs in particular. For me, this heightened attention is in some ways a mark of the continuing robust health of this new financial reality – and I’m fascinated to see where it will lead.
Throughout last year, ICOs were the most visible sign of a new way of operating in an era of fast-moving technological development – and I personally don’t see any reason why that revolution should stop any time soon.