On March 31st 2019, the Wall Street Journal (WSJ) published analysis on the current state of funding via Initial Coin Offerings (ICOs). Using data from ICO analytics website TokenData, the report provided factual findings to demonstrate precisely how ICO funding has sharply dropped throughout the last year.
How ICOs Have Disappeared within the Past Year
Throughout the first quarter of 2019, approximately $118 million has been raised through ICOs.
In the first quarter of 2018, an estimated $6.9 billion was raised.
This suggests ICOs are currently raising 58 times less than what they raised one year ago.
The WSJ’s report went on to reveal that out of 2,500 projects monitored since 2017, only 45% successfully raised funds.
Additionally, only 15% of tokens deriving from a successful ICO are currently trading at or above their price at initial offering.
The report also states how blockchain attorney and consultant Joshua Ashley Klayman has described that while ICOs may entirely disappear, the market for security tokens won’t.
Security Tokens Replacing the ICO — Explained
Security tokens— which are synonymous to ‘digital securities’— have seen increased attention from both the private sector and regulators, according to the report.
The Security Token Offering (STO) features the integration of blockchain technology with a compliant securities offering.
As the ICO wave came and went, many investors were left harmed. As a result, regulatory bodies eventually entered the space.
In 2018, the US Securities and Exchange Commission (SEC) imposed its first-ever ICO penalties and fined exchanges. It even expanded its crackdown to include investment advisors and custody solutions.
SEC Chairman Jay Clayton has repeatedly declared that virtually every ICO he has seen, qualifies as a securities offering. He also elaborated that he is “not going to change rules just to fit a technology”, resulting in security tokens being subject to existing securities laws.
The same stance has been taken by Hong Kong’s securities regulator. Spain’s securities watchdog recently announced that not a single ICO has received its approval. Even Colorado’s state securities regulator shut down 18 ICOs in 2018 alone.
The situation has resulted in companies cancelling the ICO, and turning to the STO out of regulatory worry.
For more information on security tokens, be sure to review our comprehensive security token guide.
What do you think of the recent statistics published by the Wall Street Journal? Will ICOs disappear entirely? We want to know what you think in the comments section below.
Image courtesy of JDN.