Getting to know your ICOs

Just over 12 months ago, something called an ICO burst onto the scene. By 2018, ICOs are raising billions in funds and changing the way in which businesses and startups go about funding themselves. Of course, with this success came a lot of pitfalls which have resulted in confidence levels in ICOs falling. Some investors were scammed, money was lost, dreams were shattered and many believed that they could not be trusted.

Now, thankfully things are changing. There are now as many as six different types of ICO structure that can facilitate fundraising for start-up enterprises. Whilst some of these new names are being used to escape legal ramifications, some are justified and do actually differ from the traditional ICO model.

If you are considering setting up an ICO or similar structure in Malta, these are your options.

STO

A Security Token Offering is a fully regulated ICO that has the blessing of the SEC in America. They can be categorised in ways such as Reg D and Reg S which pertain to those that apply outside of the USA. Reg A+ refers to companies that get support from major retail investors and the SEC has very harsh standards when categorising these types of mechanism

IICO

An Interactive Initial Coin Offering is a unique concept and was created by Vitalik Buterin as a more improved ICO model. It is used by FOMO and more humble investors and there is usually a maximum cap in place. Additionally, if the total limit surpasses this level the Ether is returned to the investor.

ISA

An Initial Supply Auction is one where the price starts rather high and then decreases as long as the auction is active. This means that investors can wait until the price passes a point that they think is fair, of course, if they wait too long, they risk missing out as all of the tokens could have been purchased.

SAFT

A Simple Agreement for Future Tokens is used to overcome the risks that are normally associated with ICOs. To avoid these, investors are able to invest in the knowledge that the tokens they receive in return have a purpose and will not be completely useless or valueless.

No ICO

The last option is not to opt for an ICO at all. Whilst this might sound a bit crazy, it has actually worked for some of the larger cryptocurrencies. This is by far the most trustworthy but it requires a lot of confidence from the team that is starting the company. One good example of a crypto that didn’t have an ICO is Litecoin, and look how successful it is becoming.

Either way, you need to enlist the help of an expert when it comes to choosing the type of ICO or other structure to raise money for your project. E&S can help you make the best, most compliant, and of course, legally sound decision possible. To find out more, contact us today on +356 2010 3020 or by email on [email protected]