Initial coin offerings (ICO) have created a totally new paradigm of thinking about startup funding by allowing thousands of entrepreneurs around the world easy access a new unregulated source of funding. Before fundraising was a slow process and was not always mutually beneficial to founders: most VC and fintech investors requiring more than 51% equity stake. ICO investors are buying tokens, which are, in most cases, a means of payment or a right to access functionalities on a blockchain platform.
In 2017 the total amount of funds raised via ICOs was approaching US$4 billion, twice the volume of venture capital (VC) investments in blockchain projects. In the first three months of 2018, with US$6.3 billion the level of funding has reached a new high. Up to now more than 3,219 ICOs from 348 countries have been organized worldwide.
It is estimated that more than 10% of ICO proceeds are stolen by hackers 2 through phishing.
Know your customer (KYC) is the process of a business identifying and verifying the identity of its clients and improper implementation has lead to many ICOs being closed by authorities suspecting money laundering schemes.
Regulators were totally ignoring ICOs in the past years, but are now recognizing this new way of funding. They are either banning them (China, South Korea, …) or regulating them using existing or new laws. Known for its centuries-old tradition of economic and political stability, Switzerland is one of the few country which actively support ICOs and Blockchain projects. The Swiss regulator Finma published guidelines that address the regulatory treatment of ICO structures, anti-money laundering regulation and securities.