When regulating bodies around the world are struggling to make a regulatory framework for cryptocurrencies, Initial Coin Offerings (ICOs) is gaining ground as a viable alternative to raising investment.
Startups globally including in countries such as the US, Europe and Singapore have raised capital close to $3 billion through ICO, despite no regulation in place around this space, last year, reports ET.
ICO is a form of crowdfunding, where companies raise capital by issuing their own crypto assets in exchange for established cryptocurrencies like Bitcoin, Ethereum and Litecoin, or local currencies like the Rupee or the Dollar.
Besides, an ICO can be floated by a company by offering its blockchain-based cryptocurrency or crypto-token to the general public in order to raise funding to support its underlying business plan.
Many Indian startups also raised capital through ICOs. Due to non-clarity about cryptocurrencies in India, the companies secured fund in other markets. Countries such as Singapore, Belarus, Estonia, and the UK, have simpler and supportive law which create no hindrance in launching ICOs.
Startups like Belfrics and Drivezy in India had raised funds through ICO in other countries.
SpringRole, a professional network platform in the education space, Machaao, an AI-based sports platform, EasterEgg, a gifting platform, Cashaa, a fintech company, are all Indian startups using blockchain platforms and looking to raise funds through ICOs.
Meanwhile, there has been a crackdown on them globally. Recently, Facebook and Google, Twitter announced to ban cryptocurrency, token sales and Initial Coin Offerings (ICO) advertisements on their platforms.
Chinese and India governments are also dealing cryptocurrency and ICO with heavy-hand.
RBI and India’s Finance Minister, the head of the World Bank, Jim Yong Kim, compared cryptocurrencies to Ponzi schemes. In a report, Goldman’s Steve Strongin expressing his concern said the lack of intrinsic value might lead to zero value of concurrency. Though they are bullish about using Blockchain technology.
Till date, there are a few commercial deployments of enterprise blockchain solutions. Yes Bank, one of the first, had officially deployed a blockchain solution commercially for its client Bajaj Electricals in January this year.
In December last year, a panel was set up to study the impact of cryptocurrencies and come up with recommendations to regulate them. Securities and Exchange Board of India (Sebi) chairman Ajay Tyagi and Reserve Bank of India (RBI) deputy governor BP Kanungo are also members of the committee.
Economic Affairs Secretary Subhash Garg-led panel is expected to submit its report that will contain regulations and explanations on how to deal with cryptocurrencies by April.
According to some technology experts, an ICO may have the same implications as those of cryptocurrency. It is at risk of being used in scams and investors should enter them carefully, they warned.
Meanwhile, if the investment continues, the coming few years will prove instrumental for the entire blockchain ecosystem including ICOs.