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ICO or Initial Coin Offering is the launch of a new coin or token and its sale to the public. It has become a popular method of crowdfunding that by-passes or ignores most financial regulation.

A key difference as far as regulation is concerned is that between utility tokens and equity tokens. Utility tokens represent a right to a product or service. Equity tokens represent capital or economic rights in the company that issues them.

Regulators, such as the US SEC, have clearly stated that equity tokens should be treated as securities. Utility tokens are seen as a form of crowdfunding or pre-sale of goods and services and thus not subject to the same level of regulatory control in most jurisdictions.


The first token sale (also known as an ICO) was held by Mastercoin in July 2013. Ethereum raised money with a token sale in 2014,[1] raising 3,700 BTC in its first 12 hours, equal to approximately $2.3 million dollars.[2] An ICO was held by Karmacoin in April 2014 for its Karmashares project.[3]

One of the first "mainstream" ICOs was executed by the messaging app developer Kik in September 2017. Kik had previously issued $50 million in tokens called "Kin" to institutional investors, and sought to raise an additional $125 million from the public. In connection with this ICO, an unidentified third party executed a phishing scam by circulating a fake URL for the offering through social media.[4]

ICOs and token sales are now extremely popular. As of May 2017 there were currently around 20 offerings a month,[5] and a new web browser Brave's ICO generated about $35 million in under 30 seconds.[6] There are at least 18 websites that track ICOs.[7] At the start of October 2017, ICO coin sales worth $2.3 billion had been conducted during the year, more than ten times as much as in all of 2016.[8][9][10][11][8]


Jurisdiction Comments
Australia ASIC issued guidance in September 2017 stating that the legality of an ICO depends upon its detailed circumstances.[12]
Canada Working on regulating ICOs.[13]
China On September 4, 2017 seven Chinese financial regulators officially banned all ICOs within the People's Republic of China, demanding that the proceeds from all past ICOs be refunded to investors or face being "severely punished according to the law".[14][15][16] This action by Chinese regulators resulted in large sell-offs for most cryptocurrencies.[16] Prior to the Chinese ban, ICOs had raised nearly $400 million from about 100,000 Chinese investors.[17] A week later, however, a Chinese financial official stated on Chinese national television that the ban on ICOs is only temporary until ICO regulatory policies are in place.[18]
France As of October 2017, the Autorite des marches financiers (AMF) was working on regulations governing the use of blockchain technology in capital raising transactions.[19]
Hong Kong The Securities and Futures Commission released a statement in September 2017 explaining that tokens may constitute securities for purposes of the Securities and Futures Ordinance, in which case dealing in such tokens would be a regulated activity under Hong Kong law.[20]
Isle of Man Working on regulating ICOs.[21]
New Zealand In October 2017, the Financial Markets Authority (FMA) released guidelines on the current regulatory environment in regards to ICOs.
Gibraltar In October 2017, the Government of Gibraltar published regulation establishing a framework for regulated DLT (Distributed Ledger Technology) companies to become effective on January 1st 2018. This regulation encompasses ICOs and subjects them to financial controls and standards.[22]
South Korea The Korean Financial Services Commission prohibited ICOs in September 2017 and promised "stern penalties" for violations.[23][24]
Switzerland Although Switzerland was previously viewed as a friendly jurisdiction to coin offerings, the Swiss Financial Market Supervisory Authority announced an investigation of an unspecified number of coin offerings in September 2017, and would examine whether these offerings were in compliance with Swiss regulations.[24]
United Arab Emirates The Abu Dhabi Global Market issued official guidance on ICOs in October 2017.[25]
United States In July 2017 the U.S. Securities and Exchange Commission (SEC) indicated that it could have the authority to apply federal securities law to ICOs.[26] The SEC did not state that all blockchain tokens (ICOs) would necessarily be considered securities, but that determination would be made on a case-by-case basis.[27] The SEC action may encourage more mainstream investors to invest in ICOs,[28][29] although ICOs typically prevent U.S. investor participation to remain out of the jurisdiction of the United States government.[30] The SEC charged Maksim Zaslavskiy for fraud in September 2017 in connection with the ICOs for RECoin and DRC World.[31] The SEC has ruled that celebrity ICO endorsements must disclose the amount of any compensation paid for the endorsement.[32]

External links

A number of platforms have specialised in qualifying, classifying and advising ICO listings and token sales.

See Also


  1. Marshall, Andrew (March 7, 2017). "ICO, Explained". CoinTelegraph. https://cointelegraph.com/explained/ico-explained. Retrieved 2017-03-08.
  2. "Ethereum Raises 3,700 BTC in First 12 Hours of Ether Presale" (in en). Cointelegraph. https://cointelegraph.com/news/ethereum-raises-3700-btc-in-first-12-hours-of-ether-presale.
  3. "Karmacoin Becomes First Cryptocurrency to Issue Shares". https://cointelegraph.com/news/karmacoin_becomes_first_cryptocurrency_to_issue_shares. Retrieved 27 July 2017.
  4. "$75 Million Goal: Kik ICO Kicks Off to Small Scams and Big Demand - CoinDesk" (in en-US). CoinDesk. 2017-09-12. https://www.coindesk.com/70-million-far-kik-ico-kicks-off-small-scams-big-demand/.
  5. "ICO Alert". https://www.icoalert.com/.
  6. "$35 Million in 30 Seconds: Token Sale for Internet Browser Brave Sells Out". CoinDesk. May 31, 2017. http://www.coindesk.com/35-million-30-seconds-token-sale-internet-browser-brave-sells/. Retrieved 2017-06-01.
  7. "The Ultimate List of ICO Resources: 18 Websites That Track initial Cryptocurrency Offerings". http://startupmanagement.org/2017/03/13/the-ultimate-list-of-ico-resources-18-websites-that-track-initial-cryptocurrency-offerings/.
  8. 8.0 8.1 "Coinschedule ICO Stats". Coinschedule. October 3, 2017. https://www.coinschedule.com/stats.php. Retrieved 2017-10-03.
  9. Hof, Robert (August 25, 2017). "Why initial coin offerings are exploding – and how companies can avoid the landmines". siliconANGLE.com. https://siliconangle.com/blog/2017/08/25/initial-coin-offerings-exploding-companies-can-avoid-landmines/. Retrieved 2017-08-31.
  10. "Bankers Ditch Fat Salaries to Chase Digital Currency Riches". Bloomberg.com. 2017-07-25. https://www.bloomberg.com/news/articles/2017-07-25/bankers-ditch-fat-salaries-to-chase-digital-currency-riches.
  11. "CoinDesk ICO Tracker". CoinDesk. September 1, 2017. https://www.coindesk.com/ico-tracker/. Retrieved 2017-09-14.
  12. "Subscribe | theaustralian". http://www.theaustralian.com.au/business/financial-services/regulators-warn-of-risks-of-investing-in-highly-speculative-icos/news-story/98f80779d513c20cca6b0a98f0426d50.
  13. Stanley, Aaron (September 6, 2017). "ICO Ban? Canada's Regulators Are Giving One Token Sale a Big Break". CoinDesk. https://www.coindesk.com/ico-ban-canadas-regulators-giving-one-token-sale-big-break/. Retrieved 2017-09-07.
  14. Chuan, Tian (September 4, 2017). "China Outlaws ICOs: Financial Regulators Order Halt on Token Trading". CoinDesk. https://www.coindesk.com/china-outlaws-icos-financial-regulators-order-halt-token-trading/. Retrieved 2017-09-04.
  15. Information and Communication Technology (September 4, 2017). "Seven departments on the prevention of tokens issued financing risk notice". Ministry of Industry and Information Technology. http://www.miit.gov.cn/n1146290/n4388791/c5781140/content.html. Retrieved 2017-09-04.
  16. 16.0 16.1 Vigna, Paul (September 4, 2017). "China Bans Digital Coin Offers as Celebrities Like Paris Hilton Tout Them". The Wall Street Journal. https://www.wsj.com/articles/some-digital-coins-are-up-2-800-what-could-go-wrong-1504522801. Retrieved 2017-09-05.
  17. Ou, Elaine (September 6, 2017). "Go Ahead, Try to Stop Initial Coin Offerings". Boomberg View. https://www.bloomberg.com/view/articles/2017-09-06/go-ahead-try-to-stop-initial-coin-offerings. Retrieved 2017-09-07.
  18. Young, Joseph (September 10, 2017). "China Ban on ICO is Temporary, Licensing to be Introduced: Official". CoinTelegraph. https://cointelegraph.com/news/china-ban-on-ico-is-temporary-licensing-to-be-introduced-official. Retrieved 2017-09-10.
  19. "France Is Close to Issuing a Position on ICOs - CoinDesk" (in en-US). CoinDesk. 2017-10-09. https://www.coindesk.com/france-close-issuing-position-icos/.
  20. "Statement on initial coin offerings". 2017-09-05. http://www.sfc.hk/edistributionWeb/gateway/EN/news-and-announcements/news/doc?refNo=17PR117.
  21. Higgs, Stan (September 6, 2017). "ICOs Welcome: Isle of Man to Unveil Friendly Framework for Token Sales". CoinDesk. https://www.coindesk.com/icos-welcome-isle-of-man-to-unveil-friendly-framework-for-token-sales/. Retrieved 2017-09-07.
  22. "Government confirms introduction of Government confirms introduction of confirms introduction of Distributed Ledger Technol Distributed Ledger Technology (DLT) ogy (DLT) Regulatory Framework Regulatory Frameworkin January 2018 in January 2018". https://www.gibraltar.gov.gi/new/6102017-government-confirms-introduction-government-confirms-introduction-confirms-introduction.
  23. "South Korea bans raising money through initial coin offerings". Reuters. 2017-09-29. https://www.reuters.com/article/us-southkorea-bitcoin/south-korea-bans-all-forms-of-initial-coin-offerings-idUSKCN1C408N.
  24. 24.0 24.1 Popper, Nathaniel (2017-09-29). "New Virtual Currencies Hit Barriers in U.S. and 2 Other Nations" (in en-US). The New York Times. Template:Citation/identifier. https://www.nytimes.com/2017/09/29/business/sec-initial-coin-offerings.html.
  25. Diaa, Sarah (2017-10-09). "Abu Dhabi Global Market sets guidance on initial coin offerings, virtual currencies". GulfNews. http://gulfnews.com/business/sectors/markets/abu-dhabi-global-market-sets-guidance-on-initial-coin-offerings-virtual-currencies-1.2103239.
  26. Higgins, Stan (July 25, 2017). "SEC: US Securities Laws 'May Apply' to Token Sales". CoinDesk. https://www.coindesk.com/securities-exchange-commission-us-securities-laws-may-apply-token-sales/. Retrieved 2017-07-25.
  27. del Castillo, Michael (July 26, 2017). "'Not a Surprise': Blockchain Industry Saw SEC ICO Action Coming". CoinDesk. https://www.coindesk.com/not-surprise-blockchain-industry-saw-sec-ico-action-coming/. Retrieved 2017-07-26.
  28. Mougayar, William (July 26, 2017). "Token Summit Creator: SEC ICO Guidance a 'Breath of Fresh Air'". CoinDesk. https://www.coindesk.com/token-summit-creator-sec-ico-guidance-breath-fresh-air/. Retrieved 2017-07-26.
  29. Cite error: Invalid <ref> tag; no text was provided for refs named crowdfundinsider.com
  30. Buntinx, JP (July 29, 2017). "Blockchain CEOs Respond to SEC ICO Verdict". THE MERKLE. https://themerkle.com/blockchain-ceos-respond-to-secs-cryptocurrency-ico-verdict/. Retrieved 2017-07-29.
  31. Buhr, Sarah. "The SEC has charged two initial coin offerings with defrauding investors" (in en). TechCrunch. https://techcrunch.com/2017/09/29/the-sec-has-charged-two-initial-coin-offerings-with-defrauding-investors/.
  32. Higgins, Stan (3th November 2017). "SEC: Celebrity ICO Endorsements Could Be Illegal". https://www.coindesk.com/sec-celebrity-ico-endorsements-illegal/.