Eamon Leonard
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Initial Coin Offerings (ICOs) have raised US$1.5 billion this year alone, compared to US$100 million in all of 2016. This FOMO-inspiring figure is thanks to the until recently near-complete absence of any securities regulations. In most cases, companies have raised funds entirely in Bitcoin and Ether, and did not put investors through any Know Your Customer/Anti-Money Laundering (KYC/AML) process. But regulation is coming, and depending on the jurisdiction, companies who have held ICOs in the past could be held to existing securities laws, and this could put a chill on the red-hot ICO market. At the heart of if and how to regulate an ICO is one question; Is a token a security?
One of the barriers to widespread adoption of cryptocurrency is price volatility: in an economy where cryptocurrencies must be exchanged regularly in and out of fiat, users must be confident that price will remain stable from day to day, so that costs are predictable, and profits as well. Bobbi sells bamboo bikes. Bobbi receives $1000 worth of BiteCoin (not a real coin yet) in payment for a new bike. The following week, when Bobbi pays her supplier, the price of BiteCoin has dropped by half. The bill to her supplier hasn’t changed, and so Bobbi just sold a bike for a big loss. Bobbi decides not to accept BiteCoin anymore. Bobbi thinks cryptocurrency bites.
