Impending Regulatory Changes Will Legitimize and Restructure Cold ICO Markets for the Future

Uncertainty has plagued the ICO market in the second half 2018, but government regulation lays the foundation for a bright future in token securities

The days of throwing together a white paper, announcing an ICO, and raising money outside of the traditional scope of the regulatory agencies are long over. Financial regulatory agencies throughout the world have made considerable progress over the past twelve months in more clearly defining how a token offering should be handled; in the United States, the distinction between a utility token and a security token is a fine line that has been walked by many recent ICOs, and one that is quickly disappearing as the industry matures and the SEC grows ever wiser.

This evolving regulatory landscape has caused momentous shifts in the ICO market itself; much of the new regulation has rendered ICOs only marginally more efficient than traditional fundraising methods now that many tokens are considered securities and regulated as such. Decisions taken by Facebook and Google to prohibit ads displaying ICO-related content on their sites, for example, have had a severe impact on companies’ ability to tap into the large scale crowd-source funding available through ICOs at their inception.

Daria Generalova, founder of the world’s leading ICO management firm ICOBox, says “the ICO market has cooled down a bit in recent months. What used to be a fresh and modern way of raising money has become much more legally intricate — especially for companies based in the United States and similar countries where regulating agencies are paying very close attention to fundraising efforts and their consequences. We’re optimistic that new waves of regulation will continue to clarify and present new opportunities in such a dynamic industry.”

In the midst of this shifting landscape, the idea of utilizing the ICO as an effective tool for crowd-source fundraising is still being pursued and accommodated at the highest level. The United Arab Emirates announced today that they are working on regulation designed to lay out a framework for ICOs to be conducted as a modern alternative to the more traditional IPO or private equity. Coming up with a new framework for token securities will be difficult, as regulatory agencies have struggled to decide exactly how to handle tokens, but Emirati officials have stated that the new regulation will be worked out by the first half of 2019 — that doesn’t leave them a lot of time, but it’s a bold move towards embracing the future.

For countries that are still resisting the change in financial landscape brought about by blockchain, there is a risk of falling behind the curve of progress. ICOs have proven their worth as an alternative way to raise money that is more efficient, dynamic, and inclusive than traditional financial models, and it’s unlikely that they’re going anywhere in the future. Regulating agencies make seek to control their progress, but the better model will ultimately prevail.