Category: STO

Posted on

The digital crowdfunding campaigns sink – the popularity of security tokens surges

Categories Blockchain, Cryptocurrency, ICOs, Utility Tokens, Security Tokens, STO, DLT

The digital crowdfunding campaigns sink – the popularity of security tokens surges

After a regulatory crackdown on digital crowdfunding campaigns, the value of the international ICO market has dropped significantly. As a result, investors are being driven towards a new type of crypto investment vehicle; security tokens.

ICO fever decreases

At the end of 2017 and the beginning of 2018, the popularity of ICOs reached an all-time high, but with many investors left disappointed with an increasing number of ICO failures, this interest began to drop. Claims were unsubstantiated, pricing was unrealistic, and some just disappeared with clients and investors money  to be never seen again. Global ICO funding has decreased massively due to confusion around the stances of global regulators, with many being shut down due to offering tokens that were categorized as a security.

The problem with investing in an ICO is that it can be difficult to know what type of ICO token is being used; is it a utility or security token? A utility token is a tool, not an investment, whereas a security token is an investment in a specific project or company. If a particular token can be considered as a token under securities laws, then it will find itself subjected to a range of specific rules and criteria as specified by various regulatory agencies.

The US and Security Tokens

In the US, a recent ruling by a District Court Judge stated that ICO offerings fall under securities laws and that as such, unless the token on offer is without a doubt a utility token, it must be considered as a security token.

The ruling was the result of a case brought against Maksim Zaxlavskiy who had offered and ICO to investors with the promise that the tokens were backed by diamonds and real estate. The federal prosecution deemed that this meant the tokens were a security and that Zaslavskiy had offered investors a totally unregulated securities product.

The judge noted:

“Congress’ purpose in enacting the securities laws was to regulate investments, in whatever form they are made and by whatever name they are called…”

It seems now that regulated security products will become the next big thing for crypto investors, in part due to their regulatory compliance and the big potential for gains.

CEO of Desico, Laimonas Norekika, who is also about to offer retail investors the chance to invest in registered security products said:

“Tokenized securities are bridging the gap between traditional financial markets and crypto markets because they are aligned with everyone’s interest. Regulators want to protect the investors, investors want their assets tradable, and crowds from all over the world want to invest in the most promising startups at an early stage.”

Anthony Pompliano, the founder of Morgan Creek Digital Assets also stated that he believes that security tokens should be considered as digital assets and as such should be subject to federal regulations.

If you have any questions in relation to ICOs, please contact us on [email protected]

Read More
Posted on

Getting to know your ICOs

Categories Blockchain, Cryptocurrency, ICOs, E&S Group, STO, IICO, ISA, SAFT, No ICO

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]

Read More