The ICO Gold Rush: It's a Scam, It's a Bubble, It's a Super Challenge for Regulators
40 Pages Posted: 19 Nov 2017 Last revised: 19 Jan 2018
Date Written: January 9, 2018
Initial coin offerings typically use blockchain technology to offer tokens that confer some rights in return, most often, for cryptocurrency. They can be seen as effectively a conjunction of crowdfunding and blockchain. Based on a hand selected ICO white paper database covering more than 300 ICOs we provide a taxonomy of ICOs and some initial geographical breakdown to facilitate thinking clearly about them, analyse the various regulatory challenges they pose, and suggest the first steps regulators should consider in responding to them. As our database shows, at the moment, many ICOs are offered on the basis of utterly inadequate disclosure of information; more than half the ICO white papers are silent on the initiators or backers or do not provide contact details, and an even greater share do not elaborate on the applicable law, segregation or pooling of client funds and the existence of an external auditor. Accordingly, the decision to invest in them often cannot be the outcome of a rational calculus. Many of the hallmarks of a classic speculative bubble are present in many, but certainly not all, ICOs. At the same time, ICOs provide a new and innovative structure for raising funds to support new and innovative ideas and ventures, with the potential for aspects of the underlying structures to have an important impact on fundraising systems and structures in future.
Keywords: Initial Coin Offerings, ICO, ETHER, BITCOIN, Blockchain, Securities Regulation, Investment Law, Financial Law, Securities and Exchange Commission, Financial Conduct Authority, ESMA, BaFin, CSSF, ASIC
JEL Classification: G23, G24, G28
Suggested Citation: Suggested Citation