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2018 saw the rise and fall of the initial coin offering, or ICO, as the primary vehicle through which billions of dollars in investor capital flooded the blockchain industry. A lack of regulatory oversight, continuous exit scams and Ponzi schemes, and even outright ICO bans, have created an ecosystem in which the contemporary ICO model is no longer viable.
The first quarter of 2018 saw almost $4 billion injected into the blockchain industry via ICOs, with major initial coin offerings such as EOS and Telegram capturing billions. A steady increase in regulatory scrutiny, however, has resulted in steadily decreasing ICO returns.
Data available from ICO tracking platform ICOBench indicates a downward-sloping trend. Despite a greater total number of ICO launches, the total funds captured by ICOs in Q4 2018 reveals that investor interest in initial coin offerings is rapidly declining.
Blockchain crowdfunding isn’t over, though. Interest in security token offerings – the regulatory compliant successor to the ICO – is increasing.
The Secret to ICO Success in a Shifting Regulatory Environment
Regulatory reactions to the “wild west” of initial coin offerings have varied greatly across different countries. China, Korea, and Japan have banned initial coin offerings outright, while more blockchain-friendly countries such as Malta, Belarus, and Thailand have adopted nuanced regulatory stances that are designed to foster innovation while protecting investors.
In January 2019, the Organisation for Economic Cooperation and Development (OECD) published a report calling for regulatory coherence of initial coin offerings, suggesting a supervisory framework that would allow ICOs to “deliver their potential for the financing of blockchain-based SMEs, while adequately protecting investors.”
The OECD’s stance on initial coin offerings is reflected by the development of new ICO regulations in countries that have,