Simply put, an ICO is an initial coin offering and basically, a fundraising mechanism wherein new projects sell their crypto tokens in exchange for bitcoin and ether. Clearly, ICOs are a new phenomenon in the cryptocurrency world but have quickly dominated the blockchain community. Now, while some perceive ICO projects as some unregulated securities that let founders raise an amount of capital which is considered unjustified, others believe it is yet an innovation in the traditional venture-funding model. For this reason, the U.S. Securities and Exchange Commission (SEC) has reached a decision concerning the status of tokens issued in the ICO which has inevitably forced a lot of projects and investors to do a re-examining of the funding models that abound in the numerous ICOs. Moreover, the recent SEC’s decision has been effective in clearing up some of the gray areas of ICOs. Thus, startups are now more often on the lookout for good opportunities and the underlying point or effort is to attract investors that are similarly searching for the next big cryptocurrency score.
Regardless, because several millions of dollars have been spent on ICOs in the last couple of months, there is no slowdown whatsoever in sight. As such, because a lot of startups are lately considering the benefits of an ICO, they are demanded to know the following about ICOs:
- That ICOs represent a different approach, that is maintaining the right frame of mind
- That competition in the market is fierce and
- That communication is key
Therefore, for an American startup to have an ICO, the following are required of such:
Like a sore thumb, ICOs stick out on a number of the world’s social media platforms and financial markets. In fact, an average startup has a lot of expectations in making some fortunes and thanks to the rapid growth experienced and enjoyed by the subject, ICOs have truly come to stay. Interestingly, these markets cut across local, national and international phases. Hence, no matter the type of startup that you are, it becomes very vital to understand and correctly answer certain questions that revolve around the market of ICOs and its survival as such. These questions are best answered when you consider these two set of groups:
Main Street Investors
As a startup with an eye on immediate or long-term success, you should incorporate the concerns of investors into your concept. Better put, let investors know that no ICOs whatsoever have been registered with the SEC neither has the SEC approved any ETFs (exchange-traded products) for listing and trading. That means if you are told otherwise, you should be careful. The reason is that often, SEC has encouraged investors to ask good questions and demand appropriate answers. You thus have a responsibility to meet in that regard as a startup and entrepreneur.
On the other hand, since ICOs are ways for entrepreneurs to raise fund especially for innovative projects, it is expected of you as a startup to include necessary disclosures, processes and investor protections as required by the US securities laws in your ICO offerings. Fundamentally, when a security is being offered by an entrepreneur, every securities law must be duly followed. In the light of this, market professionals with securities, lawyers, consultants, and accountants inclusive are to follow closely. In addition, before you will be able to sell securities, you require a license, which investors are in fact encouraged to look out for.
As a sum, you should be able to either demonstrate to the general public that the currency or product you are offering is not a security or better still exercise adequate compliance with every registration and requirements under securities laws that apply.
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