Regulatory and Market Challenges of Initial Coin Offerings

51 Pages Posted: 2 Jul 2019 Last revised: 5 Jul 2019

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: April 1, 2019

Abstract

This article analyzes the main problems and the solutions adopted in the market for Initial Coin Offerings (ICO), an alternative financing solution that has experienced spectacular growth and notoriety in recent years. This market relies on the use of Blockchain protocols and is, therefore, characterized as disintermediated, decentralized and unregulated. The problems we identify in this article, their severity, and the solutions currently being adopted to address them, lead us to conclude that it is unlikely that either of these characteristics will survive in the near future. Our results also indicate that the concerns expressed by regulators and other market agents regarding ICO markets are well founded. We find it particularly disturbing that such a new, revolutionary market already displays many of the problems of traditional financial markets, and that these problems were exactly the ones that occurred at the genesis of the last financial crisis.

Keywords: blockchain, initial coin offerings, regulation, cryptoassets and cryptoeconomy, trust modeling, fairness and accountability, decentralization and disintermediation risks, entrepreneurial finance, investment crowdfunding

JEL Classification: K22, G32, O16, L26

Suggested Citation

Andrés, Pablo de and Arroyo, David and Correia, Ricardo and Rezola, Alvaro, Regulatory and Market Challenges of Initial Coin Offerings (April 1, 2019). European Corporate Governance Institute - Law Working Paper No. 461/2019. 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 ECARES ULB CP 114
B-1050 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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