ICOs and Cryptotokens: A New Fundraising Asset Class—An Australian Perspective

Abstract

Most start-ups find it difficult to raise finance. In the last few years a new form of funding has emerged—the initial coin offering (ICO). ICOs provide investors with cryptotokens that often have multiple roles as stored value token, pure utility token, security token, and hybrid token. ICOs attempt to create involvement in projects without giving away equity. However, as ICOs have risen in number regulators have become more interested and sought to provide rules for their proper functioning. In this paper we argue that the regulators often overlook the advantages of ICOs in order to focus on their faults. We propose ICOs ought to comprise a new asset class with their own rules.

Note: This paper has an earlier iteration as a submission to the Australian Treasury Consultation on ICOs.

Keywords: ICO, cryptotokens, blockchain, security, regulation

JEL Classification: G18, K23, M13