ICOs – What Are They? Are They Legal?

Initial Coin Offerings (ICOs) in the simplest of words can be defined as a cross over between Initial Public Offerings (IPOs) and crowd funding. It is a way for blockchain startup companies to be able to raise capital without resorting to the traditional venture capital realm. Typically, when a major company wants to raise investment capital to accommodate fast growth, they offer shares to their investors and the Securities and Exchange Commission (SEC) will impose regulations that will protect the investors.
In an ICO, the company offers a chance for people to invest in a new cryptocurrency related business. They accept investments in the form of major cryptocurrencies like Bitcoin or Ether in exchange for crypto-tokens that serve the purpose of shares in the company.
In the case of IPOs, there’s a more stabilized system in play. Government imposed regulations and typical business practice applies to IPOs which see to it. The investment you make in an IPO might be a failed venture in case the company doesn’t manage to take off but you will have the facility to make a well informed decision as some precautionary checkboxes will be marked when the IPO was prepared. In an ICO, the rules aren’t general for all of them. The rules they function on are more case-by-case. CoinSchedule will show you currently available ICOs and those which will soon be on offer. You can take a look at them and invest in those you find interesting and promising. The terms and conditions, business model and the legal framework operating within the ICO are setup by itself rather than any regulatory body like the SEC.
The rising success of ICOs have seen a rise in investor complaints about the ICOs particularly due to the lack of transparency and major misunderstanding of ICOs by investors. There have even been cases in which the issuers of ICOs have managed to amass a large amount of investment by conducting ICOs and then disappearing into thin air.
Share holders in an IPO have more rights as investors while the token holders in ICOs don’t have as many. There is a severe lack of oversight in ICOs which have allowed criminals to exploit the platform ICOs provide to swindle investors in the equivalent of millions of dollars worth of cryptocurrencies. Some estimates show that criminals have managed to get away with as much as 10% of all ICO funds.
Major regulatory bodies around the world have shifted their attention towards cryptocurrencies in the light of such scams that have taken place using cryptocurrencies. China has taken strict regulatory actions against ICOs. They’ve placed a blanket ban on all ICOs and any currency exchanges dealing with cryptocurrencies. All those involved in activities related to ICOs will be subject to full investigation and liable to criminal charges.
That being said, ICOs have not been declared ‘illegal’ throughout the world as a whole. Even China’s ban on ICOs seems to be a temporary measure being taken by China’s PBoC while they can set up a proper regulatory structure in place to provide more security to investors and eliminate any possibilities of future scams.

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