Initial coin offerings, or ICOs, are becoming very popular as Bitcoin, Litecoin, Ethereum and others continue to be adopted by payment processors and online stores. A lot of these ICOs sound great from the outside, and over $6.9 billion has been raised in 2018 thanks to ICOs. But there are also a lot of scams.
A study from earlier in the year found that 80% of ICOs are scams, and only 8% of all ICOs reach an exchange. The major issue is that project starters don’t realize that there are a lot of regulations on ICOs. You can’t just start a project, take investor funds and not be held accountable to some degree. Of course, there are some ICOs that have no intention of fulfilling their project or development duties.
Protecting against a failing ICO or having an ICO that has legal issues requires you to have a thorough understanding of ICO regulations. You also have the option of working with ICO law professionals that will help guide your project from development to exchange while:
- Remaining SEC compliant
- Raising capital and funds
A few of the documents and items that may need to be reviewed to ensure compliance include:
- Press releases
These two items can cause a project to fall out of compliance, or these two items may push away potential investors. It’s important that all of these documents, even including blog posts and social media posts, are reviewed properly to ensure that they’re in your business’ best legal interest.
False promises or outlandish claims can and will be reviewed by regulatory agencies even if they seem like a “mishap” internally.
Risk Assessment And Professional Advice
Legal advice can help an ICO move forward while staying compliant with SEC regulations. A risk assessment must also be performed to help:
- Identify fundraising risks
- Reduce compliance issues
- Mitigate potential risks
The goal of an ICO is to raise capital and attract investors, and a risk assessment is a good start in remaining compliant and avoiding potential, project-ending issues.
SEC Registration And Compliance
ICOs started out as the Wild West, but the Securities and Exchange Commission is aiming to stop that. As one of the controlling entities, the SEC has imposed restrictions and regulations on cryptocurrency projects.
If your project is within the United States, it’s important to register with the SEC and remain compliant. Registration is required before raising funds, too. The goal is to prevent investors from being defrauded, and this means more red tape for an ICO. An attorney is the best option when registering with the SEC and trying to remain compliant the entire time.
Proper formation and structuring can also help an ICO come to fruition. It’s important to stay within the relevant regulatory frameworks of the law. ICOs and STOs that remain compliant and are registered with the proper agencies attract higher investment volumes, secure their offering’s future and reduce the risk of legal issues in the future.
Legal experts that are familiar with ICOs and international laws are the best resource for ensuring compliance.
If you are interested in even more business-related articles and information from us here at Bit Rebels then we have a lot to choose from.