ICOs or Initial Coin Offering can never be out of action! Well, Bitcoin has brought fire to the news reports and now latest to feed news with something to show as proof is ICO aka the Initial Coin Offerings. Read on to know what this study reveals.
Compliance Trilemma being Faced by Initial Coin Offering
Over a time period of 6 months, a team ran investigations over ICO Space. This team had been funded by not only the Government of Canada but also by the University of British Columbia.
North America along with a few other countries came under the radar for this research and this study found out that most of the people (or at least the ones who were interviewed for this study) felt: ICO issuers have been facing a kind of ‘trilemma’!
What is Compliance?
Before we go ahead with a detailed report of trilemma, let us understand basics of compliance: that turns out to be: Regulations in Home Jurisdiction of not only the Investor but also the Issuer.
Trilemma, occurs when two out of the three objectives could be only addressed at a particular point of time. These are none other than ‘to reach a distributed pool of the investors’ with other one being ‘have a complaint offering’. One more interesting fact is: these have to be in a cost-effective mode only.
An individual should understand a simple fact here which is: ‘broadly distributed pool of investors’ are the most benefited lot from ICO; it is according to the funding mechanism. The more investor pool becomes distributed the better, as the cost of complying with that of ‘financial regulators’ grows.
In case this does not happen then risk of non-compliance rises resulting in nothing else but trilemma: wherein you either compromise on all three goals or stay happy with two of them.
Approaches available to ICO Issuers
There are three kinds of approaches that ICO issuers can make use of, below you find a detailed list of these approaches:
Approach 1: Maverick ICO
As per this option, one can ignore compliance to maximize ICO reach besides cost effectiveness. There is a huge risk involved here due to regulatory enforcement.
Approach 2: Hybrid ICO
There is another approach that results in compromise(s) on 3 dimensions; happens when issuing in select markets. Due to such a scenario, there would be compliance plus investor scope besides bounded cost effectiveness.
Approach 3: Private ICO
Third approach solely speaks about accredited as well as institutional investors. This happens only after there is a sacrifice in distribution. There is a plus point here because cost effectiveness is not to be affected but in ‘secondary market trading control’ there can be challenges.
Approach 4: No ICO
Individuals who opted for this approach felt better at all ends as they chose regulatory authority over approaches.
45 interviewees gave in their views on compliance trilemma and most of them thought clarifications on regulations would be helpful.