Unregulated ICO has now become more of a problem for start-ups than a boon. The investors are in a dilemma as it does not work under the guidelines laid down by any financial authority. Although, this latest fundraising method has worked well in some cases yet it remains a questionable idea to most of the investors.
According to a report published in japantimes.co.jp, a Japanese startup was able to raise 100 million Japanese Yen in four minutes last March. Masahiro Yasu, CEO Alis Co., said, “We were confident of our business plan . . . but we were surprised when we could actually attract that much money that quickly.” The firm was also able to achieve its goal of raising 400 million Japanese yen in 10 days.
Likewise, some firms have been backing up ICOs as they save entrepreneurs from convincing banks and venture capitalists for a loan while skipping the initial public offering. CoinSchedule, an ICO based website, said ICOs were able to raise $3.8 billion worth of digital currency last year, in sharp contrast to a mere $95.1 million raised in 2016.
Are ICOs a success or a threat?
Even after Yasu’s success, Japan cannot be looked upon as a platform backing up ICOs. The country is yet to get in terms with the ICO trend completely. There are no specific ICO related guidelines pinned by the Financial Service Agency. Industry experts are still keen on testing ICO as a fundraising method as it can easily be used for conducting frauds. They demand a legal framework which would possibly protect consumers from getting duped by fake companies.
Initial coin offerings cannot define the credibility of the company as any trustworthy third party does not regulate it. Investors depend on white papers, the business blueprint provided by the company, to invest their hard earned money. Pina Hirano, Head of Blockchain Collaborative Consortium, said, “The white paper is the only (way to check the company), but it just talks about how it wants to develop the business in the future, so people can be easily tricked.”
Blockchain technology is still unclear to many investors which is the prominent reason for them getting betrayed by fake companies. The mentality of “making easy money” has also helped malicious companies in duping casual investors. In a recent case, a start-up named Confido conned investors and disappeared with $375,000 raised through its ICO.
Japan’s way forward in the crypto space
Amidst the chaos, leading companies like Google and Facebook have banned advertisements related to digital currencies and ICOs. The U.S. Securities and Exchange Commission is monitoring blockchain based companies as selling securities demand higher scrutiny. France is trying to include ICO in its legal framework, and China has posed a complete ban on ICO offerings.
Japan is also home to Crymix which is focused on enabling real-time exchange of value for more reliable use of the crypto technology. Coinspeaker.com reported that the Crymix INC is working with the University of Tokyo, local governments, NGOs and corporations to combine the blockchain technology with new age business plans.
Though the country faces contradictory situations simultaneously, it is trying to cope up with the idea of using blockchain and cryptocurrency for its growth. 2018 can be a definitive year for ICOs standing as a legitimate business ritual.