Initial Coin Offerings: Nearly Half of Capital Raised through European Entities
A prominent venture capital firm in Europe released a report on November 30, 2017, publishing its research on the statistics of global initial coin offerings (ICOs).
Swaths of European Money
According to Atomico, the researchers behind the study, entities based in Europe raised $1.76 billion through the fundraising platform. This translates to forty-six percent of the total global funds raised in this manner since 2014.
Based in the digital world of cryptocurrency, initial coin offerings are neither legal nor illegal in most countries, although explicitly banned in China as part of the Chinese government’s cryptocurrency crackdown. Unregulated and controversial, they are most commonly used as a form of crowdfunding to generate capital for new startups.
ICOs are still a relatively new trend, which raises funds by selling a newly-issued cryptocurrency in return for bitcoin, ether, or fiat money. To date, the Securities and Exchange Commission (SEC) has not brought forward any new regulations for the phenomenon. Instead, they have merely issued advice on how best to remain within the confines of existing law.
New Technology and Old Regulations
This has created frustration for many involved with ICOs, with Ronen Kirsh saying the following at the ICO Financing Conference:
“You’re trying to fit a new technology into existing regulations, instead of changing regulations to fit with the new technology.”
The research conducted by Atomico based their data sets on TokenData – a platform based in California which collects and compounds ICO statistics and analytics. Although 90 percent of the data was from the past year, the research included ICO activity dated as far back as 2014.
According to researcher Ricky Ran, 47 percent of Europe’s total was made up by Switzerland alone, especially in the low-tax area of Zug.
Twenty-eight percent of the amount was brought in by North America, which contributed $1.08 billion of the total $3.8 billion.
Additionally, there was a prediction made in the report that the historical resistance of larger European firms may begin to fade, which would allow those venture firms to associate with ICOs as well.
Enter Major Institutions Stage Left
Union Square Ventures and Andreessen Horowitz have already taken the plunge and invested in ICO fundraisings, closely followed by smaller firms such as Blueyard Capital of Berlin, among others.
The Atomico report forecasts that 2018 will be the year that the “most established funds” participate as well.
Since the introduction of initial coin offerings, many have remained on the sidelines due to fear of extensive regulation and Ponzi schemes alike. Moreover, more traditional funding methods such as private investments or stock market flotations have continued to operate correctly.
A large reason for the success of ICOs is there ability to generate funds in a market where capital is largely scarce.
Besides China, South Korean officials have also banned the fundraising platform this year. The American SEC is postponing any final decisions regarding the introduction of any new regulations or amending existing legislation. Some believe that the American commission should have acted a long time ago.
The report additionally shows that Germany and Austria closely follow Switzerland when it comes to capital raised. The collective amount of $976 million is triple the amounts from Eastern and Central Europe. When compared to Ireland and Britain, the amount is four times more.
However, Central and Eastern Europe have launched far more ICO ventures when compared to the above regions.