Challenges of the market for initial coin offerings

21 Pages Posted: 2 Jul 2019 Last revised: 24 Nov 2021

See all articles by Pablo de Andrés

Pablo de Andrés

Universidad Autonoma de Madrid; ECGI

David Arroyo

Consejo Superior de Investigaciones Científicas (Spanish National Research Council)

Ricardo Correia

Universidad Autónoma de Madrid

Alvaro Rezola

Universidad Autónoma de Madrid

Date Written: November 1, 2021

Abstract

This article analyzes the main problems and the solutions adopted in the market for Initial Coin Offerings (ICO), to anticipate the future of this market and determine implications for issuers, investors and regulators. ICOs represent an alternative and innovative financing solution that has experienced spectacular growth and notoriety in recent years. ICOs rely on Blockchain protocols and the ICO market is, therefore, characterized as decentralized, disintermediated and unregulated. Our results show that although the ICO market is innovative, it already displays many of the problems of traditional financial markets, and that these problems were at the genesis of the last financial crisis. Our analysis of the problems and solutions adopted shows a tension between what the Blockchain technology offers, and the problems associated with the financing of innovation. Considering the problems and solutions adopted, we no longer expect the ICO market to be characterized as disintermediated, unregulated or even decentralized in the near future. Furthermore, it is a real possibility that ICOs may end up being a progressor model eventually replaced by similar but more specialized financing models, some of which may already exist. With respect to the particular solutions of the ICO market, while some represent the realization of the potential of Blockchain, others such as forks have important Governance implications with the potential to create as many problems as the ones they address.

Keywords: Blockchain, Alternative financing solutions, Initial coin offerings, Asymmetrical information

JEL Classification: G23, M13, K24, O16, O36

Suggested Citation

Andrés, Pablo de and Arroyo, David and Correia, Ricardo and Rezola, Alvaro, Challenges of the market for initial coin offerings (November 1, 2021). European Corporate Governance Institute - Law Working Paper No. 461/2019, International Review of Financial Analysis Volume 79, January 2022, 101966, Available at SSRN: https://ssrn.com/abstract=3413117

Pablo de Andrés

Universidad Autonoma de Madrid ( email )

Campus de Cantoblanco
C/ Francisco Tomás y Valiente, 5
Madrid, Madrid 28049
Spain
+34 91 497 6527 (Phone)
+34 91 497 3954 (Fax)

HOME PAGE: http://www.uam.es

ECGI

c/o the Royal Academies of Belgium
Rue Ducale 1 Hertogsstraat
1000 Brussels
Belgium

David Arroyo

Consejo Superior de Investigaciones Científicas (Spanish National Research Council) ( email )

C/Serrano, 144
Madrid, Serrano 28006
Spain

HOME PAGE: http://https://dargcsic.github.io/

Ricardo Correia (Contact Author)

Universidad Autónoma de Madrid ( email )

Campus Cantoblanco
C/Kelsen, 1
Madrid, Madrid 28049
Spain

Alvaro Rezola

Universidad Autónoma de Madrid ( email )

Campus Cantoblanco
C/Kelsen, 1
Madrid, Madrid 28049
Spain

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