Federal and state regulators aren’t the only ones taking a closer look at initial coin offerings: so is the plaintiffs’ bar.
In the last month alone, class actions have targeted five ICOs, alleging they were unlawful sales of unregistered securities, and securities lawyers say more are sure to follow.
“The possibility of these types of lawsuits shouldn’t be a surprise to anyone in the industry at this point. The SEC has been very vocal recently that it will deem most tokens or coins issued through ICOs to be securities under U.S. law,” Benjamin J.A. Sauter, a securities litigator at Kobre & Kim LLP told Bloomberg Law. “Companies selling new tokens or coins through ICOs to U.S. investors are taking a calculated risk.”
No federal court has addressed whether ICOs implicate securities laws and the question is still up for debate, Joshua Ashley Klayman, of counsel at Morrison Foerster LLP, told Bloomberg Law.
The Ixo Foundation’s “proof of impact” protocol wants to give investors knowledge that their money is working–and save organizations time and money in evaluating if their programs are working.
As philanthropists and impact investors pour money into social and environmentally focused businesses and projects, a nagging question often hovers over their efforts: Is the capital actually ending up where it is intended, and is it delivering impact in a measurable, tangible manner?
The Global Impact Investing Network (GIIN), an industry group, says that investors committed $22.1 billion to projects that deliver both financial and social and/or environmental purpose in 2016. Philanthropies increasingly believe that putting money into social businesses rather than issuing grants to nonprofits brings bigger, more sustainable, returns. And a wide array of mainstream funders, including pension and sovereign wealth funds, have recently entered the impact investing field. One prominent example from 2017: the $2 billion Rise Fund backed by TPG, a private equity firm, and a host of celebrity investors including Richard Branson and Bono.
However, a lack of measurement and verification standards may be holding back further capital flows in the impact investing sector. GIIN’s survey last summer of more than 200 funders found that 40% see data about performance as a “significant” or “very significant” challenge.Could blockchain technology come to the rescue? The Ixo Foundation, based in South Africa, believes so. It is developing a “proof of impact” protocol allowing data about projects–for example, that a child has been vaccinated or that a tree has been planted–to be recorded on a distributed ledger (a blockchain). This enables the claim of impact to be verified as legitimate and for funders thousands of miles of away to see that their money has been well spent. It also creates a new asset class, a cryptographic token that’s issued as the claim is authenticated, that could become the basis for a more organized, regulated form of investing.
Less than 0.001 percent of global venture technology funding went to African startups in 2016. It is no secret that entrepreneurs in emerging markets have a harder time coming by capital funding than do their counterparts in developed markets. Among the many reasons for this are inefficient capital market systems that create obstacles for entrepreneurs in emerging markets, who face barriers to cautious investors.
The ‘leapfrogging’ phenomenon
Thankfully, tokenized equity and initial coin offering (ICOs) strategies can redefine capital markets and how startups issue securities and create corporate structures in emerging markets. Entrepreneurs and governments can leapfrog inflexible capital market systems created by developed market economies and instead create entirely new tokenized, flexible and accessible capital markets.
From virtually no access to a flexible capital markets system, entrepreneurs in emerging markets can benefit from a new generation of democratized and tokenized investments in private companies, and this could be made possible by the implementation of ICO strategies.
Tokenized capital markets in emerging markets can accelerate a leapfrog effect for growing startup ecosystems by placing young entrepreneurs and their businesses at the center of their countries’ growth. He notes that despite the potential, ICOs still have their training wheels on and need to find a meeting ground between existing conventional equity/debt systems and new and innovative tokenized ones.
The New Year has started with a bang for cryptocurrencies as most of them are posting gains again on day three of 2018 during the Asian trading session. Bitcoin itself has had a shaky start but crypto fervor is still strong as a number of companies are getting onboard the blockchain train.
In an effort to boost stocks Hooters Restaurants’ investor Chanticleer has announced plans to offer customers virtual currency in return for eating at their restaurants according to a report by Fortune.
BOUNCING BITS AND BLOCKCHAINS
Small cap stock companies can see significant gains by announcing links to Bitcoin and blockchain technology. The results from this announcement were pretty instant as investors deemed Chanticleer 50% more valuable following it. The current market value of the franchiser stands at $12 million and stock has jumped from $2.5 to over $3.75 in less than a week according to NASDAQ.
The company intends to use Mobivity Holding’s blockchain system to create a cryptocurrency based loyalty program for Hooters diners.
CEO of marketing platform Mobivity, Dennis Becke, said;
Eating a burger is now a way to mine for cryptocoins! Every meal enjoyed at any Chanticleer Holdings brand will accrue currency for the consumer that can be used for future meals or traded with other consumers.
Blockstack’s initial coin offering (ICO) has officially closed, with the company announcing today it has raised $50 million through the sale of 440 million tokens.
Launched in November, the sale saw investors – including Union Square Ventures (USV), Foundation Capital, Lux Capital, Winklevoss Capital, Blockchain Capital, Digital Currency Group, Y Combinator partner Qasar Younis, Techcrunch founder Michael Arringtonand Digg founder Kevin Rose – fund Blockstack’s particular vision for a decentralized web built on blockchain technology.
Still, in statements, the Blockstack team was keen to stress that those involved are best thought of as long-term partners, all of whom agreed to take long positions in its new cryptocurrency.
For example, Blockstack said the largest investment came from an undisclosed endowment, which secured a $6 million allocation after agreeing to a four-year lock-up for half of its allocation (other investors had a two-year lockup, with a $3 million maximum).
Co-founder Muneeb Ali told CoinDesk:
“I think it’s more like a funding round, with high-quality sophisticated investors, rather than random people just throwing money at something,”
Brussels is taking a “soft touch” approach to regulating blockchain as it explores the technology’s applications across government services.
The European Commission is approaching blockchain with “acceptance and support but a healthy degree of caution” said Romanian member of the European Parliament Sorin Moisa speaking at an event in London in Tuesday.
He also said that a warning on initial coin offerings issued by the European financial watchdog earlier this month and which said they would be treated as securities would not apply to utility tokens. These differ from cryptocurrencies in that they facilitate a transaction rather than having an intrinsic value in themselves.