The Law And Initial Coin Offerings

It is no longer news that initial coin offerings (ICOs) are the latest trend to hit the cryptocurrency market. Interest in ICOs started in 2013 when Mastercoin gave the cryptocurrency world the first ICO.

Ethereum quickly jumped on the trend and was able to raise over $2.3M within the first 12 hours of its ICO. It currently has over 80% market shares in ICOs while other platforms have a little over 5% market share.

In 2016, 54 major ICOs around the world raised over $100M. That figure grew to a surprising new height in 2017 when 92 major ICOs raised $1.25 billion.
With this continued growth, it is clear that ICOs are a great way for startups to raise money and get investors. It is a fact that individuals in countries like the United States, Russia, UK, Switzerland, and Singapore are leveraging on. The US is at the top of the food chain, as states that over $770M has been raised through ICOs in that country.

ICOs are open to everybody, thus making it possible for the ‘average man’ to invest and raise money. That doesn’t make it good news though, as the freedom ICOs offer make it possible for scams to occur.

In fact, in February 2018, a crypto startup named Giza raised $2.4M in a fake ICO which attracted the attention of over 1,000 investors. And in 2017, individuals put up a fake team picture, created Benebit blockchain token system and walked away with $2.7M – $4M during an ICO.

The scams will continue to happen as long as ICOs remain unregulated and legality isn’t taken seriously. What most people do not know is that the process of running an ICO has some legal repercussions that have to do with an application’s design.

Always Take Legal Advice

In basic terms, the absence of ICO related guidelines does not mean that startups and their ICOs are immune from the law. It is quite the opposite. Teams that choose to run an ICO need to be extra careful with a determination to avoid committing any offenses – intentionally or otherwise.

This is why it is important to have ICO legal advice and support throughout the process. Legal institutions understand that legal certainty and clarity should govern the relationships between the ICO team and coin/token buyers, holders, or users.

Getting a legal outfit involved in the process of an ICO means getting a stamp of approval from an authority that protects the interests of potential investors and consumers, thus making them feel safer when they make donations towards an ICO project. There’s a sense of calm when investors know there’s a place they can go lay complaints if anything goes wrong during the process.

When it comes to the legal aspects of a blockchain project and ICOs, one can never be too careful. Therefore, seeking the counsel of a lawyer to review all promotional documents, social media platforms, website, token terms, and any other material, should be at the top of that to-do list.

Simon Zenios & Co LLC

Tel.: +357 – 24 023370
Email: [email protected]


Published on: 28/06/18