Tokenization of Equity : A Step Towards Wider Acceptance of Blockchain In Crowdfunding!
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We look back and call 2017 undoubtedly as “The Year of ICOs” with raising of over $22 billion. This includes companies of all sizes. Companies who are in ideation phase of their revolutionary projects and companies who plan to do reverse ICOs, both have benefited from this type of crowdfunding.
The gold rush was due to the hype created and subsequent rise of Bitcoin and Ether’s price, however, the real reason was due to the liquidity provided by the ICOs and that they are not restricted by regulatory authorities. The reason for unrestricted crowdfunding is because of the lack of clarity from regulatory bodies and the tentative nature of regulators to bring in the much needed structure to the blockchain based crowdfunding.
Once the SEC declared ICO as securities, a major debate between crypto-community and the institutional investors regarding the status provided to the crowdfunding campaigns came in the limelight.
To clear the air, a security is a contract of investment recognized by regulators, for the preservation or appreciation of capital, whether it is ICO, STO, ETO or other traditional crowdfunding methods. To be in a security contract, it requires an active counter party, such as an issuer of tokens. Seasoned investors talk about ICOs in terms of stocks or bonds that are tokenized on the blockchain to enhance liquidity and transparency in the ecosystem. However, investing in a utility token in expectation of profits is more or less a security.