An initial coin offering ( ICO for short) is an ‘initial offer of criptomonedas’ , as recalled from the Bank of Spain and the Comisión Nacional del Mercado de Valores (CNMV) ” ICO is an acronym that evokes the expression IPO ( initial public offering ) used in connection with IPO processes or OPV, for its acronym in Spanish “.
How does a work ICO ?
In an ICO, a company or individual issues coins or tokens and put on sale . In exchange receives fiat currencies such as the euro or the dollar, or virtual currencies such as Bitcoin or ether .
What types of ICO exist?
The characteristics and purpose of the coins or tokens vary according to the ICO :
- Some coins or tokens are used to access or purchase a service or product that the issuer has used the proceeds from the ICO .
- Other grant voting rights or a share in future revenues of the issuing company.
- Some have no tangible value .
- Some coins or tokens sold and can be exchanged for fiduciary currency or virtual platforms specialized exchange after issuance.
As explained regulators, expression ICO can refer both to itself issue cryptocurrency s as the rights issue of various kinds generally called tokens cryptosystems .
Alex Preukschat , author of LibroBlockchain.com recalls an article elEconomista , which ethereum raised 31,531 bitcoines ($ 15 million at the time) during his campaign launch with preminado system in summer 2014. Investors had to wait a year to negotiate their ethers on the market, because it is stipulated in the investment pact ICO . It is estimated that there were more than 100 in 2017 alone ICO .
Warning: the risks of ICO
The National Securities Market Commission (CNMV) and other European and international monitors, acknowledges that it is aware of the difficulty which may involve the engagement of the instruments that are issued in these transactions in the current regulations. As well as the possible inadequacy of the regulatory framework to some new business models and digital collaboration .
Most of the ICO explain their projects in sheets with inaccurate content they call white papers . Although as the CNMV warns, the information available to investors ” is not usually audited and often is incomplete”. In addition, “generally it emphasizes the potential benefits, minimizing references to the risks.”
While in an initial public offering of shares of a company, the process is underwritten by an investment bank and is strictly regulated by securities regulators, in the process of ICO , the tokens or criptomonedas may not be subject to regulation .
” It is essential that those who decide to purchase this type of digital assets or invest in related thereto consider all the associated risks and assess if you have enough information to understand what is being offered products” warn both the CNMV and the Bank of Spain . ” In this kind of investment there is a high risk of loss or fraud ” incident.
The European Securities and Markets Authority (ESMA, for its acronym in English) and warned of the high risk of ICOs . In November 2017, he issued a statement to inform investors about the high risk of losing all the capital invested. According acknowledged, the ICO is highly speculative and high – risk investment because:
- The price of the coin or token is generally extremely volatile and it is possible that investors can not redeem them for an extended period.
- Depending on how they are structured, the ICO may be beyond the reach of laws and EU regulations . This implies a lack of protection for investors.
- The ICO are also vulnerable to the risk of fraud or money laundering .
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