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The King is Dead, Long Live the King! Dispatches from the Front Line of the ICO Debate

Written by Matthew Dove (Digital Editor)

This year, the three most divisive letters in fintech have been I, C and O…

On balance, the initial coin offering has proved the most controversial development to emerge from the advent of cryptocurrency. Given that we’re talking about an innovation which also gave rise to Mt. Gox, the Silk Road and a new breed of bank-baiting cyber anarchists, that’s no mean feat.

There are stats a-plenty to suggest all is not well for the ICO. Those published by ICORating recently are particularly damning;

  • Only 7% of ICOs from Q2 (2018) have been able to secure exchange listings
  • 55% of all ICOs from this period failed to hit their funding target
  • Only 15% of projects already had a working business

Nonetheless, the humble initial coin offering was used to raise a staggering 8.4 billion US dollars in the second quarter of 2018 which is hardly a death rattle by anyone’s standards.

As 2018 draws to a close, the jury’s still out and the debate rages on as some herald the demise of the ICO whilst others claim that this is only the beginning for one of the most explosive fundraising mechanisms ever conceived. The Fintech Times will be weighing in on the subject at our Are ICOs are dead? What’s next? panel discussion on November 20th, so let’s have a look at the rival camps a little more closely…

The King is Dead!

One of the panelists joining us in a fortnight (at the RocketSpace Theatre in Angel) is Jeff Sweeney of US Capital Global and he’ll be sharing his unique take on the fate of the initial coin offering and its potential successors.

In a recent piece for our print edition (available to read in full here), Sweeney spoke of his firm belief that the time for utilising an, “ICO to avoid securities regulations is over.” Whilst he’s heaped praise on the notion of digital securities in general, calling them, “an exciting way to hold and trade valuable assets electronically”, Sweeney is entirely dismissive of ICOs in their present form, referring to them as “discredited.” 

Sweeney argues that the future of digital ledger technologies (DLTs) lie beyond the ICO as we know it. US Capital Global’s chairman feels that blockchain technology would be better served handling “alternative assets” which he asserts are, “any asset that is not a public security or a ‘rated’, i.e. rated by a rating agency, like Moody’s or S&P.” The worth of such assets dwarf those being covered by ICOs presently and the market is unspoilt, as the financier explains;

“This is a multi-Trillion-dollar asset class with very narrow public distribution. Few are able to participate in this asset class – even though the population of qualified investors has quadrupled over the last 20 years, participation in this asset class has barely increased.”

Long Live the King!

The team behind BlockEx, a digital asset exchange platform, have a slightly different conception of where ICOs sit in the grander scheme of things. Edd Carlton, the exchange’s global head of ICO listings doesn’t see the mechanism, “as a standalone asset class. Instead, it is a subset of a larger asset class.” He feels fundamental misunderstandings surrounding the function of an initial coin offering have, in part, lead to their reputation becoming soured. Carlton has argued that ICOs should be viewed as a means of participating in blockchain innovation rather than as traditional investments. Furthermore, their global reach in terms of both fundraising and attracting technical expertise to projects shouldn’t be underestimated.

BlockEx analyst, Denis Vinokourov, predicts a future where ICOs and other asset classes will co-exist harmoniously following what he sees as an inevitable wave of state regulation. In fact, he feels that the end of the crypto Wild West will herald in a new golden era for fundraising in the space;

“Quick buck ICOs are dead…long live the mature market ICO market.”

With no short supply of disparate opinion to mine, Are ICOs Dead? What’s next? could prove a memorable evening, so save the date. 

For a limited time only enter the promotional code FINTECHTIMES when you register and join us on November 20th at the RocketSpace Theatre, Angel for free!

 

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