Last year was a banner one for initial coin offerings. Every day it seemed a new ICO was being launched.
This could be another strong year for the offering, but signs are showing that not as many will just slide right through. These signs include the many failed ICOs last year, as well as the increased scrutiny of the offerings by regulators this year.
Then there are the proactive steps some organizers of ICOs are taking to make sure their offerings pass muster.
Jaw-dropping number of failures
We’ve told you repeatedly about ICOs, and we’ve even featured on our site what would be called the good, the bad, and the ugly.
As much of our reporting has noted, many of the ICOs deserve careful study before one decides to participate. The worry has long been that many will fail, and whatever product or service that was planned to be offered, would never come to fruition.
Indeed, that has been the case, as a recent report showed that 46% of the crowd sales held last year failed. Interestingly, these still managed to raise more than $104 million.
Roughly 900 ICOs listed on Tokendata were examined. It was found that 142 of them fell short of their fundraising targets, and 276 went under before they even finished the offering.
Just as those trying their luck at raising funds through an ICO have learned more about what to do and what not to do, so have regulators.
While regulators still have varying opinions about how to handle ICOs, their massive uprising last year made it easier for them to quickly identify the bad actors.
Officials with the U.S. Securities and Exchange Commission have resorted to nontechnical, old school, means of rooting out bad actors who are feigning the launch of legitimate ICOs. They are calling them by phone, and putting them on notice.
The commission’s head of its cyber enforcement unit, Robert Cohen, recently told people at an SEC event about this technique. He noted, according to Bloomberg, that more than a dozen crypto-related companies had scrapped plans to raise money from investors after the SEC had simply rang them.
The calls entailed the SEC rep telling the ICO planner that the offering being planned may be in violation of federal securities laws.
And with that, the SEC credits its phone calling technique with causing more than 12 crypto-related outfits to scrap their ICO plans.
The good actors
The last sign we’ll mention here about the changing ICO space relates to the startups with well-intentioned ICO plans. To avoid being labeled as scams, or running afoul of securities laws, these players are taking matters into their own hands.
They are hiring so-called compliance advisors to help them. Some of the services these advisors offer include verifying customer identities and making sure the funds are legitimate.
Eamon Jubbawy, is a cofounder and COO of Onfido, which is a document verification business. He recently weighed in on the growth in the use of services like he offers when he was interviewed by Business Insider.
“The start of Q4 to end Q4 [there was] a 10x increase in checks for crypto clients.
Jubbawy added that crypto startup founders often do their checks themselves, only to learn later they need help.
"Quite often they're doing it in the house themselves before they come to us. They're doing it manually and then they realize they need someone to be able to automate it and do it at scale."