Yes, sure, the heavy hand of the government may move slow compared to the pace of blockchain innovation. But when it connects with its target – it really hits home – causing widespread impact and implication to the industries, companies and people that operate within them.
Well the hand of the SEC has begun to move towards the cryptocurrency market. As per the SEC website – many different aspects of the industry are in the potentially heavy handed shadow. Currently under investigation? ICO’s, Account Hacking, Insider Trading, Market Manipulation, Safeguarding Consumer Information, Trading Suspensions, and Exchange Listings.
Be it an adjustment, a light slap, or crushing blow – here’s what it may mean for the future of ICO’s.
Potential Avoidance of the US Market
Wouldbe cryptocurrency startups, enthusiasts and market professionals understand that should the SEC move to drastically alter or crush the ICO market via regulation – there is a high probability that ICO’s the world over will avoid the US market and US investors altogether.
With billions in potential investment money available from dozens of markets globally, it is highly probable that in consideration of heavy regulation – most ICO’s will avoid the US market.
This, while protective in the short term, may serve as a heavy hindrance to innovation in the long run.
Not only would this stop innovative blockchain startups from connecting with US investors, but it would stop innovative blockchain from creating or housing operations on US soil – allowing other, more willing countries to absorb and benefit from the innovation.
Return to Traditional Methods of Raising Capital
Should the SEC decide to pursue less heavy handed regulation, ICOs may find themselves approaching traditional Angel and Venture Capital as a means for developing go-to-market core products.
This trend has already started to flourish – with ICO’s pursuing private sale SAFT (Safe Agreement for Future Tokens) deals with accredited investors, raising “family and friends” captical to get beta versions off the ground, and running Private Sales before Pre-Sales or ICOs altogether. Analogous to Angel rounds (without the lost percentage in equity) this type of capital raise has started to pick up traction and will continue to do so in the future.
As small or large regulations start to unfold – ICO’s should expect to get well versed and acquainted with private fundraising regulations and structures, as accredited investors will undoubtedly become a go-to source for much needed capital.
In most market cases government regulation hinders and restricts startups from being able to push boundaries and create new, innovative products. However even in this case, it’s important to note that the ICO regulation discussion thus far, is targeted at how a blockchain company raises capital. The underlying ability to apply blockchain to different industries, and create innovative solutions is still wide open.
ICO’s looking to predict what the market outcome will be, may consider new go-to-market strategies and smaller core products to reduce initial costs and overhead – potentially reducing the need to ICO until later stages.
While the Telegram ICO is experiencing a tremendous amount of pressure from local governments, perhaps the build-it-first, get-users-second, ICO-third strategy will become more prominent? Should Telegrams ICO actually launch, it is reported to be between $1.7 and $2-Billion dollars. As an example of raising funds to further development – this would top the charts as the largest ICO to date, giving Telegram the capital they need to continue their development.
Ultimately it’s a Complex Situation
Blockchain companies who are here for the long-haul, and are looking to build significant mid to large scale business will actively seek to tackle this head on.
Those who can (and do opt) to work with the regulatory agencies in various countries may find themselves in a very lucrative opportunity to raise capital and take their business well into the future.
Written by: Cahill Puil, the founder of Byte Media Group, a Strategic Marketing Consultancy that helps blockchain and technology companies with branding, marketing, PR & community development.