Sci-Fi ICOs Sci-Fi ICOs Versus Real Business ICOs: What is the difference?

SEC and ICOs – Is the threat of enforcement regulators way of intervening in the market for ICOs? 

Stepping into the fray today, the SEC seems to think so.  ICOs increasingly find themselves in the regulatory ‘grey’ area – Are their token projects securities or not? Are utility tokens currency for a platform or securities subject to the relevant regulatory legislation and legal framework?  What the market needs is clear rules and guidance on how tokens are treated, followed by equal enforcement for all participants on both sides of the transaction.

Know your ICO

Investors need more information to understand what they are buying when participating in an ICO.  Without clear rules, there is no consumer protection only speculation on returns generated by initial crypto-currencies.  This creates the perfect storm for scams and hype to take hold.

Everyone agrees investors need to be clearly informed about the risks of investing in ICOs.  Net worth status of investors should not be used as a means of protection from KYC or AML requirements across borders or an excuse for the lack of transparency around the value proposition of ICOs.  In principle, an ICO spreads the risk across a large pool of investors; but if all tokens become worthless, everyone loses regardless of the level of risk.

Sci-Fi ICOs Versus Real Business ICOs

Like the Emperor’s new clothes, will the token value every materialize or remain invisible?  Blockchain has been hailed for its transparency, data protection, privacy, and anonymity.  ICOs are opaque in nature and designed to fund the development of businesses ‘in the real world’. Most ICO sponsors are start-up businesses looking for alternative means of funding their growth.

An article published in Forbes introduces two distinct categories of ICOs:

  • ‘Sci-Fi’ ICOs, those built on an enhancement to an original blockchain idea which does not yet exist in the real world or as a business, and
  • ‘Real Business’ ICOs, blockchain projects chained with the real world, through an existing business or platform.

It is an interesting point as ‘Real Business’ ICOs account for less than 5% of the market according to DARFChain.

Do investors understand the difference between the two or how to tell them apart?  More importantly, should regulators create transparency by actually regulating the market rather than making threats to do so?



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